ERICSSON NIKOLA TESLA GROUP
Annual report
2022
Annual report
1
Ericsson Nikola Tesla Group
Ericsson Nikola Tesla Group in brief
Parent company
Ericsson Nikola Tesla d.d.
Core business
Provider of modern information and communications products,
solutions, software and services
Address
Krapinska 45, PO Box 93, HR-10 002 Zagreb
Poljička cesta 39, HR-21 000 Split
Ulica Hrvatske Republike 29, HR-31 000 Osijek
Vukovarska ul. 7A, HR-51000 Rijeka
Telephone
Zagreb / +385 1 36 53 535
Split / +385 21 20 58 00
Osijek / +385 1 36 53 535
Fax
Zagreb / +385 1 36 53 156
Split / +385 21 43 58 34
Osijek / +385 1 36 53 156
E-mail
etk.company@ericsson.com
pravni.poslovi@ericsson.com
Web
https://www.ericsson.hr/en
Personal identification
number (OIB)
84214771175
Commercial court
registration number
(MBS)
080002028
Statistical
number (MB)
03272699
Share capital
HRK 133,165,000
Number of shares
1,331,650 registered shares
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Ericsson Nikola Tesla Group
Ownership structure LM Ericsson 49.07 percent
other shareholders 50.18 percent
treasury shares 0.75 percent (as at December 31, 2022)
Share trading
Ericsson Nikola Tesla shares (ERNT-R-A) are traded in the Regular
Market of the Zagreb Stock Exchange (ZSE)
IBAN
RBA HR7624840081100331673
ZABA HR8423600001101235687
PBZ HR2223400091110012058
ERSTE HR8824020061100414168
OTP HR5324070001024070003
ADDIKO HR9725000091101465712
Management Board
/ Managing Director Gordana Kovačević, MSc
Chairperson of the
Supervisory Board Franck Pierre Roland Bouétard
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Ericsson Nikola Tesla Group
Subsidiaries and branch offices
Ericsson Nikola Tesla Servisi d.o.o.
Core business
Provider of network infrastructure build and maintenance services
Address
Krapinska 45, HR-10 002 Zagreb
Telephone
+385 1 30 38 503
Fax
+385 1 30 38 601
E-mail
ehr.company@ericsson.com
Web
https://www.ericsson.hr/en/ericsson-nikola-tesla-servisi-doo
Personal identification
number (OIB)
47445593925
Commercial court
registration number
(MBS)
080921748
Ownership structure Ericsson Nikola Tesla d.d. 100 percent
IBAN
RBA HR2124840081107008882
ZABA HR4723600001102860133
ESB HR7324020061100756266
Director
Dario Runje
Chairperson of the
Supervisory Board Gordana Kovačević, MSc
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Ericsson Nikola Tesla Group
Ericsson Nikola Tesla BH d.o.o.
Core business
Provider of modern information and communications products,
solutions, software and services
Address
Ulica kralja Petra Krešimira IV, Lamela B-bb, Mostar,
Bosnia and Herzegovina
Telephone
+387 36 446 492
Fax
+387 36 446 494
Web
https://www.ericsson.hr/en/ericsson-nikola-tesla-bh-en
Unique identification number
(JIB)
4201717070003
Tax number (VAT ID) 201717070003
Registration number 58-01-0534-18
Ownership structure Ericsson Nikola Tesla d.d. 100 percent
IBAN
UniCredit Bank BA393386904896538387
Raiffeisen Bank BA391611000002324857
Director
Adnan Halimić
Chairperson of the
Supervisory Board Gordana Kovačević, MSc
Branch office Sarajevo
Address
Fra Anđela Zvizdovića 1, Sarajevo, Bosnia and Herzegovina
Telephone +387 33 252 260
Fax
+387 33 209 419
Unique identification number
(JIB)
4201717070011
Director
Adnan Halimić
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Ericsson Nikola Tesla Group
Libratel d.o.o.
Core business
Provider of telecom services; installation, putting into service and
upgrading telecom equipment (core and access network)
Address
Selska 93, HR-10 002 Zagreb
Telephone
+385 1 36 54 035
Fax
+385 1 36 54 038
E-mail
libratel@libratel.hr
Web
www.libratel.hr
Personal identification
number (OIB)
97566215530
Commercial court registration number (MBS) 080300404
Ownership structure Ericsson Nikola Tesla d.d. 100 percent
IBAN
ZABA HR7623600001101211096
Director
Branko Dronjić
Ericsson Nikola Tesla d.d. – Branch office Kosovo
Address
Vicianum, Arberia 3- Veranda C2.10 - Objekti D3, Nr:39, Pristina,
Republic of Kosovo
Telephone
+381 38 749 080
Tax number (VAT ID) 600411235
Registration number 70633647
Ownership structure Ericsson Nikola Tesla d.d. 100 percent
Director
Besar Spahija
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Ericsson Nikola Tesla Group
Ericsson Nikola Tesla BY d.o.o
Address
Kirova str 8, office 33, 220030 Minsk, Republic of Belarus
Registration number 192753195
Ownership structure Ericsson Nikola Tesla d.d. 100 percent
Director
Mario Lovreković
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Ericsson Nikola Tesla Group
Highlights 2022
●
Sales revenue MHRK 2,242 (MHRK 2,204)
●
Gross margin 8.2 % (11.5 %)
●
Net profit MHRK 119 (MHRK 177)
●
Cash flow from operating activities MHRK 187 (MHRK 370)
●
Multi-year strategic contracts signed with the customers in Croatian and export markets
●
In cooperation with the leading Croatian operators (HT, A1 HR) – continuation of fiber
optic and 5G network rollout
●
In the Digital Society segment - several contracts signed aimed at further digital
transformation of public services
●
Growth of R&D activities and provision of services to Ericsson, important contribution in
the development of 5G and in the Cloud area
●
Further quality cooperation with the operators in the neighboring countries’ markets -
HT Mostar, Crnogorski Telekom, IPKO Kosovo; new contract with the operator Telekom
Kosovo
●
The share of export in the total revenue remained at a high level of 56.7%
●
Strong market activities in line with our focused strategy
●
Continuation of investments in research, development and implementation of modern
ICT solutions, development of employees' knowledge and skills, and our own digital
transformation
●
Excellence in project execution with high cost and operational efficiency
●
Strengthening the culture of ethics, integrity and compliance; risk management,
profitability and cash flow have been continuously in our focus
●
In addition to Zagreb, Split and Osijek, the company also has a newly opened office in
Rijeka
●
Further employment: 350 new experts employed, mainly highly educated in STEM (440)
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Ericsson Nikola Tesla Group
Sales revenue and net profit (in MHRK)
2500
2242
2204
2023
2000
1779
1558
1500
1000
500
177
114
103
119
95
0
2018
2019
2020
2021
2022
Sales revenue (MHRK)
Net profit (MHRK)
Newly employed
2018
2019
2020
2021
2022
Newly employed
338
273
204
440
350
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Ericsson Nikola Tesla Group
Annual report on Group performance
Gordana Kovačević, MSc
President of Ericsson Nikola Tesla
At the beginning of 2022, we hoped that after two pandemic years, life and business will return
to normal; but due to geopolitical situation and, consequentially, challenging economic
circumstances, this did not happen. However, the demand for digitalization of public services
and solutions and services based on mobile technologies which experienced a strong growth
during the pandemic, has continued. Therefore, we are optimistic about new business
opportunities.
Market overview
In 2022, Ericsson Nikola Tesla Group successfully navigated many challenges and despite a
turbulent business environment, achieved sales revenue of more than HRK 2.24 billion, 1.7%
more compared to the record 2021. The share of export in the total revenue remained at a high
level of 56.7%, which confirms the company’s leading position in the ranking of Croatian
exporters. In line with our strategic directions, we have focused on excellence in the
implementation of many projects for customers in the domestic and export markets, as well as
finding new business opportunities which partially offset the negative impact of sanctions
imposed on Belarus. Furthermore, we had a strong focus on monitoring and mitigating the
impacts of many risks, especially inflationary effects that manifested in the increase of prices
of materials and raw materials, services, significant growth of energy prices and increase in
labor costs.
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Ericsson Nikola Tesla Group
The domestic market was marked by the continued investment of the leading operators,
Hrvatski Telekom and A1 Hrvatska, in the build of fiber and 5G networks, in which we, as the
long-term reliable partner, support them. Due to negative global trends, such as rising prices of
electricity and inflation, the operators have optimized the investment dynamics in certain
business segments, which was reflected in the reduction of our sales revenues. In the Digital
Society segment, we have signed several contracts aimed at further digital transformation of
public services, which partially offset lower revenues in the operator segment. We worked
intensely on projects in e-Health, e-Business, public security, transport and on innovative
solutions for Industry 4.0, that resulted in cooperation agreements with the Ministry of Justice
and Public Administration of the Republic of Croatia, Ministry of Culture and Media of the
Republic of Croatia, Croatian Health Insurance Fund, State Geodetic Administration, Ministry
of the Interior of the Republic of Croatia, and the City of Split.
In the neighboring markets, we have continued a quality cooperation with the operators HT
Mostar, Crnogorski Telekom and Ipko Kosovo on the modernization of mobile networks.
Moreover, at the end of 2022 we signed a contract with a new customer Telekom Kosovo, with
which we started the cooperation related to the modernization of core and radio network. With
this partnership, we strengthen our position on the Kosovo market, where we have been
present for many years, and since 2013 we have had an office in Pristina, which we plan to
expand.
The situation caused by the invasion of Ukraine shocked us all and caused numerous reactions
in social, political and economic terms. In the Ericsson Nikola Tesla Group, we empathize with
the Ukrainian people, and we express our solidarity as a company and as individuals in
different ways.
The company had no contractual obligations in Russia and Ukraine, however, the situation
adversely affected the implementation of Ericsson Nikola Tesla's contracted business in
Belarus as well as new business opportunities. Following the imposition of sanctions on
Belarus, we terminated the contract for the project of implementation of eHealth of the
Republic of Belarus and stopped all new sales activities in this market. We have continued with
the execution of contracts in the operator segment in the market of Belarus that had been
signed before the sanctions, strictly adhering to the decisions of sanctions that were introduced
by the EU institutions. In accordance with the new situation, we have completely restructured
our office in Belarus.
A significant part of our business refers to services to Ericsson through activities of our
Research and Development Center and other expert centers. This business segment has been
recording a continuous growth and accounted for almost 46% of the sales revenue. By working
on products and projects that secure Ericsson's technology leadership, our Research and
Development Center (R&D) has positioned itself as one of the top-rated centers within the
global corporation. We would like to highlight the contribution of our experts in the
development of new features in 5G, as well as taking over new responsibilities in Cloud. Our
experts in expert centers for solutions and services also record excellent results on many
projects worldwide and significantly contribute to the company's results.
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Ericsson Nikola Tesla Group
Key performance indicators
In regard to key performance indicators, sales revenue increased by 1.7% year-over-year,
primarily owing to sales growth in services to Ericsson, as well as Digital Society segment in
the domestic market. Gross margin decreased to 8.2%, as a result of sanctions in Belarus, but
also due to business mix, increase in labor costs, increase of the prices of services as well as
energy, raw materials and materials. Operating profit decreased by 31.1% to MHRK 128.5. If
we exclude the one-off impact of the termination of eHealth contract in Belarus, gross margin
was 9.7% compared to 11.5% in 2021, while the operating profit decreased by 15% to MHRK
158.4. Cash flow from operating activities was MHRK 187.0, which is better than planned,
considering the market environment. Cash and cash equivalents, including the short-term
financial assets at the end of the year amounted to MHRK 557.5 (44.4% of the total assets).
Main business risks
Business risks that marked 2022 also impact the business performance in 2023. Geopolitical
conflicts and macroeconomic instability adversely affect the realization of certain contractual
obligations, collection of receivables, demand for our products and those of our customers, and
limit our growth. We are also faced with the lack of ICT experts and inflationary pressures in
the form of increase of prices of labor, services, energy and materials and disruptions in supply
chains. The demand for customer financing continues, as well as our exposure to increased
credit and financial risk in case our customers face adverse financial conditions. A challenging
global environment, as well as consolidation among the providers of products and services,
and new ICT companies entering the market leads to an increased competition, which impacts
the demand and prices of our products and services.
Our well-established process of integrated business risk management (Enterprise Risk
Management), which has been an integral part of our management system for many years and
that we have been continuously improving, help us significantly in identifying and mitigating
the risks we face.
Business ethics and compliance
The driving force behind our company’s culture are high standards in ethics and compliance.
We have embedded zero tolerance for corruption as the leading principle on the highest levels
of the company. Moreover, we have been implementing it throughout all organizational levels.
The Supervisory Board and the Executive Management have been regularly analyzing key
risks during meetings and discussing about compliance issues in order to ensure that the
company operates in line with the highest standards. We require all employees, as well as all
stakeholders with whom the Group has a contractual relationship, to act in accordance
with the provisions of the Code of Business Ethics and the Code of Conduct for Business
Partners of the Ericsson Nikola Tesla Group in their daily work. During 2022, further
improvements were made following the Anti-bribery and Corruption Risk Assessment at the
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Ericsson Nikola Tesla Group
Group level, and an assessment of the effectiveness of checking the integrity of business
partners was carried out. Further education in the field of compliance and anti-corruption for
employees continued, along with checking the integrity of employees in key positions.
Sustainability and corporate responsibility
Excellence and excellent reputation of our experts and the use of modern ICT technologies in
creating innovative solutions for challenges faced by our customers, as well as a response to
today’s biggest challenges such as climate change, are our main foundations for ensuring long-
term business sustainability.
We attach special importance on the collaboration with the academia because we believe that
as a socially responsible company we have to make a substantial and quality contribution to
the development of education in Croatia i.e., its adaptation to the needs of the labor market.
Through tradition of cooperation with the academic community that includes Ericsson Nikola
Tesla’s Summer Camp for STEM students and through other projects and study programs, we
strive to contribute to the development of quality ICT experts.
In 2022 we hired more than 350 new experts, and in order to additionally award and motivate
our key employees, in line with the decision of the General Meeting, the Management Board
was given consent to distribute additional 5,000 treasury shares to employees. We have
continued to buy our own shares and during 2022 we have bought additional 6,585 shares on
the Zagreb Stock Exchange.
In line with our strategy of growth and business decentralization, at the beginning of June we
opened an office in Rijeka. I believe that this office will, like our locations in Split and Osijek,
become a center of excellence where ICT experts, by working on the latest technologies
contribute to the digital transformation of Croatia and other countries where we operate. In
September, we marked 40 years of business operations of Ericsson Nikola Tesla's office in Split
that employs almost 700 experts. Our office in Osijek that has more than 80 employees, also
has potential for further growth.
As a socially responsible company, we are focused on the quality cooperation with all
stakeholders: customers, partners, employees and shareholders. Therefore, we are especially
pleased that our efforts have been recognized and valued by Hanfa award for the best
compliance with the Code of Corporate Governance among the issuers on the Regular Market
of the Zagreb Stock Exchange, and the "Award for building public trust" for the most
transparent reporting awarded by PwC Croatia in cooperation with the Zagreb Stock
Exchange. We were awarded the “Hrvoje Požar” recognition for the project of rational energy
management, and we also received recognition for the investment in a new energy efficient
Data Center.
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Ericsson Nikola Tesla Group
Outlook
In 2023, we expect the trend of growing demand for ICT solutions to continue, which opens
new opportunities for our company on the market.
Therefore, we continue to implement our strategy, with an emphasis on investing in research,
development and implementation of modern ICT solutions, the development of employees'
knowledge and skills, and in the digital transformation of the Ericsson Nikola Tesla Group. By
hiring and retaining talented experts and investing in people, we will be able to respond to
market demands and secure the long-term sustainability of business. As a company with
globally recognized experts, we have the potential for even more active contribution to
achieving the targets of EU for Digital Decade in cooperation with other stakeholders in the
ecosystem in Croatia and beyond.
Considering that business challenges that marked 2022, such as high inflation, geopolitical
conflicts, and macroeconomic uncertainty, are also impacting business operations this year,
our strong focus remains on risk management, cost optimization, profitability and cash flow,
as well as corporate social responsibility. We are also committed to further strengthen the
company’s culture based on integrity, ethics and compliance, and we are certain that with the
highest standards in the area of compliance, we secure additional competitive advantage and
sustainability.
Our long-term strategic positioning in ICT technologies, innovative solutions, strong leadership
and employees’ competences provide an excellent position for further growth and success of
the company and create additional value for all our stakeholders.
I would like to use this opportunity to thank all the employees of Ericsson Nikola Tesla Group
for their dedicated work, innovative approach and reliable support to our customers, and thank
our customers and partners for their cooperation and trust.
All other data comprising the annual company report pursuant to Article 250a of the
Companies Act can be found in the enclosed 2022 Annual Report, consisting of General Report,
Non-financial report, and Consolidated and Non-Consolidated Financial Statements, including
the Independent Auditors' Report as at December 31, 2022.
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Ericsson Nikola Tesla Group
Business model
Operating in a constantly changing and diverse business environment our business model is
driven by creating a value for all stakeholders - our customers, our customers’ customers (end
users), our partners and suppliers, governments and regulators as well as the society
surrounding us.
We create value for our stakeholder by focusing on:
Customers – enabling new sources of revenue, increase end-customer experience and
continuously growing efficiency
Employees - attracting, retaining and developing top talents
Shareholders - creating new value
Society – being responsible and relevant driver of positive change
Company foundations:
Purpose: To provide connectivity and innovation platforms for digital transformation
Vision: A world where ICT solutions transform society, securing sustainable future and
value for all
Business foundations:
Highly competent & innovative people, strong company culture
Best-in-class digital infrastructure, solutions and services offering
Leading position & expertise in areas of SW development and services delivery
Strong local presence & perception
Our business segments are created accordingly.
Telco Customers
Wanted position: Trusted advisor to our customers and a market leader in our markets / for our
customers.
Customers from Digital Society
Wanted Position: Partner of choice that leads digital transformation in selected verticals like e-
health, land registry, intelligent transport systems (ITS), etc.
Software development and System integration services
Wanted Position: Among the best performing, most competent and reliable sites for SW
development, positioned in strategically important product areas, as well as highly competent
and competitive customization and SI services hub providing highest technical, consultative
and innovation capabilities.
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Ericsson Nikola Tesla Group
Company strategy
Company strategy is providing a framework within which we agilely identify and act upon new
opportunities and threats, with a goal of creating a world where ICT solutions transform
society, securing sustainable future and value for all.
Strategy of our company is constantly evolving and adapting to key themes and trends on the
market. Three key themes can be identified as market priorities:
New revenue streams/services
End-customer experience
Relentless efficiency
Our strategic focus remains on Digital infrastructure, Innovative ICT solutions, SW
development and other services through:
Scalable, resilient and reliable networks and platforms, superior efficiency and
customer experience with automated operations and services
Integrated information systems, platform-based offerings, data driven operations and
integration capabilities for selected industries
Leading edge technical expertise and competences, securing efficient development of
innovative, fault free, value-added SW products and services
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Ericsson Nikola Tesla Group
By strict following of our strategic choices, we address CSPs and enterprises need for mobile
broadband with ubiquitous high speed and low latency connectivity as well as supporting
digital transformation with solutions spanning from dedicated networks to SW products and
services for e-health, land registry, ITS and other selected verticals.
We address needs of corporate customers through relentless focus on quality, delivering
best-in-class lead times and cost/performance benefits in development of SW products and
execution of ICT services.
Foundations for our strategy are:
•
Highly competent & innovative people, strong company culture
•
Best-in-class digital infrastructure, solutions and services offering
•
Leading position & expertise in areas of SW development and services delivery
•
Strong local presence & perception
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Ericsson Nikola Tesla Group
Business responsibilities and activities
Ericsson Nikola Tesla d.d.
Ericsson Nikola Tesla is the leading provider of communications products and services for
communications service providers, as well as a provider of ICT solutions and engineering ICT
services. The company has a strong Research & Development Center, as well as many Service
Centers. The company provides a modern test environment which enables quality testing of
the operators’ and internal users’ networks. It is among the leading exporters in Croatia, and
number one when it comes to exporting knowledge and providing engineering ICT services.
The company meets customer demands by combining an advanced Ericsson portfolio with an
innovative portfolio of Ericsson Nikola Tesla, with the support of highly educated employees.
The company’s vision is a world where ICT solutions transform society, securing sustainable
future and value for all.
The company’s main activities encompass:
– research and development, software development and other services
– creating and implementing e2e ICT solutions for communications service providers and ICT
solutions for Digital Society
– local, regional, and global service provisioning
– marketing and sales network.
Ericsson Nikola Tesla Servisi d.o.o.
The core business of Ericsson Nikola Tesla Servisi is providing services related to monitoring,
build and maintenance of telecommunications network infrastructure. With regard to the
services portfolio and many years of experience in managing telecommunications projects, the
company meets the most complex and most demanding market and technology requirements,
and also offers a service on a turnkey basis.
The company’s activities are:
– consultancy services, including design, geodetic activities, monitoring and resolving
property-legal affairs
– constructing and maintaining telecommunications network
– monitoring and operating telecommunications network
– mounting telecommunications equipment, telecommunications system power and cooling.
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Ericsson Nikola Tesla Group
Libratel d.o.o.
Libratel’s core activity is to provide highly professional and cost-efficient telecom services,
installation of telecom equipment, commissioning of telecom network, and telecom equipment
upgrade.
Ericsson Nikola Tesla BH d.o.o.
The company operates on the market of Bosnia and Herzegovina and delivers products and
services offered by Ericsson Nikola Tesla Group.
Ericsson Nikola Tesla d.d. – Branch office Kosovo
The branch office operates on the Kosovo market and delivers products and services offered
by Ericsson Nikola Tesla Group.
Ericsson Nikola Tesla BY d.o.o.
The company operates in the market of Belarus and delivers products and services offered by
Ericsson Nikola Tesla Group solely to fulfill the remaining obligations from the contracts that
were signed before March 2, 2022, in the civil telecommunications sector, in line with the valid
sanction regulations of the Republic of Croatia and the European Union and the necessary
time-limited export licenses issued by authorities.
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Ericsson Nikola Tesla Group
Products and services
In the telecommunication segment, the Group delivers an entire range of ICT products,
solutions and services of Ericsson Nikola Tesla, Ericsson, and other selected providers. Modern
solutions that we offer are based on cloud infrastructure with network functions virtualization.
We create and implement e2e solutions for radio, transmission and core networks, offer
business support systems, as well as other solutions such as media solutions and solutions for
private networks. The services we offer to telecommunication operators are planning and
design of networks, design, build, monitoring and maintenance of fixed and mobile
telecommunications infrastructure, network integration and optimization, support and
consulting.
For selected industry and market segments, Ericsson Nikola Tesla Group provides its customers
and partners its own products, solutions and services for digital transformation of health care,
transport, public administration and public and national security, solutions for managing land
and infrastructure, and solutions for sustainability and smart energy management.
The company’s research & development center was recognized both in the region and within
the Ericsson corporation for its quality, reliability, and expertise. The company’s services
centers provide highly efficient technical and consulting services.
We enable automation of business processes for business systems and offer IS/IT services
ranging from design, implementation and integration to maintenance.
Innovations represent an indispensable component in the development and application
of the overall offer of solutions, services and products of Ericsson Nikola Tesla Group.
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Ericsson Nikola Tesla Group
Business situation in major markets
Of the total sales revenue, the domestic market accounted for 43.3%, services to Ericsson
accounted for 45.7%, while other export markets accounted for 11%. The share of total export
represents 56.7% of the company's revenue.
In the domestic market, sales revenue amounted to MHRK 970.7 (2021: MHRK 1,051.2); down
by 7.7 % year-over-year. Sales in the operator segment decreased by 11%, while in the Digital
Society segment sales increased by almost 20%.
With Hrvatski Telekom we have continued a quality cooperation in all business segments.
Based on the existing Management Services Agreement for the construction and maintenance
of fixed and mobile telecommunications infrastructure, supervision of the telecommunications
network, and field maintenance of the active access and passive network, all the agreed
targets were realized until the end of Q4. The deliveries related to contracts for the design and
build of the passive part of FTTH networks and procurement and installation of passive FTTH
material, co-financed by the European Structural and Investment Funds, are also ongoing as
planned.
Our strategic partnership in the domain of the radio part of mobile network has certainly
contributed to the fact that Hrvatski Telekom, in addition to winning the umlaut Best in Test
award, once again won the Ookla Speedtest Awards and recorded the best annual Speed
Score™ as well as the best Coverage Score™ result.
With the strategic partner A1 Hrvatska we have continued the activities related to the
expansion of the radio 5G network coverage and capacity, as well as modernization and
expansion of radio access network capacities. At the same time, the cooperation continued on
the realization of contracts related to build of convergent core network, as well as on the
modernization of microwave transmission systems. The realization of contract for the delivery
of radio access active equipment for the build of the next generation mobile broadband access
network in areas without broadband infrastructure and without sufficient market interest for
investments, co-financed by the Operational Programme Competitiveness and Cohesion
funds, is ongoing.
In the Digital Society segment, we have been working intensely on projects in the segment of
e-Health, management of spatial plans, digitalization of public administration and public
safety, as well as on new innovative solutions for the digital transformation of industry and
society. We would like to highlight the contract with the Ministry of the Interior for the delivery
of new mobile systems for monitoring the green border, and a new three-year framework
agreement for the maintenance of the emergency call system. We have contracted the
continuation of cooperation related to the support services for the application system of the
Joint Information System of Land Registry and Cadaster (JIS) for the Ministry of Justice and
Public Administration and State Geodetic Administration. With Hrvatske ceste, we have
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Ericsson Nikola Tesla Group
contracted the establishment of the national access point for multimodal information in
transport, as well as the development of a route guide as part of the provision of multimodal
information services in transport. In the e-Health segment, we continued the informatization
of the central healthcare IT system with the Ministry of Health. The contracts related to
maintenance and upgrade were also signed with several hospitals. With the Croatian Health
Insurance Fund, a contract was signed for the procurement of adjustment and migration
services of the CEZIH application system, and with the Central State Office for the
Development of the Digital Society, a contract was signed for the project Consolidation of
CEZIH Healthcare Infrastructure System with the aim to further upgrade the national
healthcare IT system. The project of digitalization of cultural heritage of the Republic of
Croatia with the Ministry of Culture and Media continues.
In export markets (excluding services to Ericsson) sales revenue amounted to MHRK 247.2
(2021: MHRK 253.2), down by 2.3% year-over-year.
The quality cooperation with the operators HT Mostar, Crnogorski Telekom and IPKO
continues on the expansion and modernization of their telecommunication networks.
With HT Mostar, we have contracted the final phase of the 4G/4G+ mobile network
implementation project, as well as services with regard to support and expansion of this
operator’s transmission network. Based on these contracts, coverage and capacity will
increase, and HT Mostar users will enjoy higher speeds and better user experience on the road
to 5G.
In 2022, several contracts were also signed with Crnogorski Telekom. We would like to
highlight a five-year contract singed in October, by which a long-term successful cooperation
on the improvement and modernization of Crnogorski Telekom mobile network continues.
During Q4, the activities continued on the mobile network modernization which include an
increase of capacity, expansion and coverage of Montenegro with 5G signal.
In the Kosovo market, with the operator Telekom Kosovo, we started the cooperation related
to the modernization of core and radio network and maintenance of this operator's network.
This contract encompasses the modernization and virtualization of the entire core network,
introduction of the state-of-the-art equipment in the radio part of the network and the
implementation of Kosovo international code 383 in the network.
After the sanctions had been imposed on Belarus, we have terminated the contract for the
project of implementation of eHealth of the Republic of Belarus and have stopped the signing
of the already agreed new contracts in the operator segment. In line with the obtained time-
limited permits from sanctions committees of the Republic of Croatia and the European Union,
we are finishing the realization of certain obligations in the operator segment for the contracts
that were signed before the EU's sanctions for Belarus came into force.
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Services to Ericsson recorded sales revenue of MHRK 1,024.2 (2021: MHRK 899.5), up by
13.9% year-over-year.
In 2022, the Research and Development (R&D) Center of Ericsson Nikola Tesla successfully
delivered key functionalities in all business areas (Networks, Mobile Switching Center, Unified
Data Management, Cloud). We would like to highlight a significant contribution of our experts
in the development of New Radio (NR) Dual Connectivity feature by which Ericsson has
achieved 4Gps, which is at the moment record speed in 5G telecom networks. The contribution
of Ericsson Nikola Tesla’s R&D teams was also recognized in developing the first Voice over
New Radio release and its commercial launch at a few 5G networks. Due to this, the customers
can provide a new and superior user experience via a cloud-native 5G Standalone architecture.
We are proud that we were able to contribute to such an important milestone, as standalone
5G is the future of wireless.
Ericsson Nikola Tesla's R&D Center also received new responsibilities. Within the Cloud area,
after Ericsson had discontinued assignments with the suppliers in Russia, we have dedicated
additional teams and took over their responsibilities and have successfully delivered the
projects/products in line with the initial plan. Thereby, we have proven the organization’s
strong flexibility in challenging and unpredictable situations.
Experts from Customer Services and Solutions Center, in addition to projects for the customers
of Ericsson Nikola Tesla Group, have worked on projects for Ericsson customers on the
activities of creating solutions and defining network parameters, optimization and integration
of solutions and technologies in many EU Member States and other countries such as the
United Kingdom, Switzerland, the United States of America, Canada, Japan, Singapore,
Indonesia, India, Saudi Arabia, etc. These are complex projects that, among other activities,
include the introduction of 5G technology, operational and business support systems, as well
as projects for the introduction of core solutions in Cloud. The activities have also continued on
developing and implementing software tools for mobile networks management and
optimization, which are used in network rollout by many operators worldwide.
In the Digital Society segment, our experts, in addition to many projects for Ericsson Nikola
Tesla’s customers, also achieved quality results on projects regarding IoT platforms and
Connected Urban Traffic for the needs of Ericsson corporation.
The teams working on activities in the area of IT& Engineering Services, in addition to
providing excellent support and achieving excellent results on test environment management
projects and IT operations for the Ericsson corporation, also had a key role in digital
transformation processes of Ericsson Nikola Tesla Group and provided quality support for
work for Ericsson Nikola Tesla Group’s employees, as well as remote support to
customers.
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Ericsson Nikola Tesla Group
Scientific and research activities
Scientific and research activities at Ericsson Nikola Tesla are aligned with long-term strategic
business development goals. They are focused on the applied research for the development of
new products, research of new processes and technologies, and the application of new
functionalities for our products’ requirements.
The driving force behind scientific and research activities is Ericsson Nikola Tesla’s Research
Unit. This unit is responsible for Ericsson Nikola Tesla’s Institute that virtually connects all the
people across the company who participate in scientific research. In research on joint projects,
we cooperate with R&D centers in the corporation as well as with universities, institutes, and
companies in Croatia and abroad.
An important part of research activities refers to participating in projects directly funded by the
European Union, or projects from Structural Funds controlled by the EU. We have continued to
successfully work on H2020 project PHArA-ON, which is a four-year project that started at the
end of 2019. The purpose of the project is to test and consolidate the technology-assisted living
platforms for the elderly. The system’s architecture had been defined, and the pilot projects in
Italy and Slovenia, for which we are responsible, have started. The overall ecosystem was also
launched, in which we work with new partners and services that are aimed to be provided as
an extended solution of the defined platform. We have very successfully continued to work on
H2020 project INSULAE, that lasts for four years, and its purpose is to apply technology to
improve life on European islands. Our company participates in the case for the island Unije in
Croatia, where the elements for energy consumption control in households were successfully
developed. The results of the project have initiated business interest in the application of such
technology solutions for new commercial cases. The work on H2020 project OLGA has
continued. The purpose of this innovation project is the application of technology solutions for
sustainable business related to several airports in Europe, and our role as a partner is to work
on solutions for airport building sustainability and the optimization of Zagreb airport traffic.
All the necessary elements for the experimental application of technology have been defined.
Mid-2022, the work on H2020 TRUSTEE project began. In the following three years the project
will research concepts for distributed security. Our role is related to defining the architecture of
such a system and creating concepts for testing and checking the security of the proposed
system. The work also started on the H2020 project SmartEPC in the domain of planning and
optimizing electricity consumption, with a highlight on public lighting and new services for
energy savings.
We have continued a quality research cooperation with the Faculty of Electrical Engineering
and Computing, University of Zagreb. A highlight was given to the project of research into the
communication between various devices in the overall machine communication, the
application of machine learning to air quality control, as well as the impact of new services on
the planned network infrastructure to achieve continuous quality of service. We carried on with
the research into the system for the optimization of radio signal transmission. Special focus
was put on the research of new radio elements in the build of antenna systems for multiple
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input and multiple output of signal (MIMO), as well as the development of support for
beamforming radio signals. Our employees who are enrolled in PhD programs have been
working on these projects along with the faculty professors and the company’s employees who
already have a PhD. With the Faculty of Electrical Engineering, Mechanical Engineering and
Naval Architecture, University of Split, we have worked on the project of data reliability in
sensor networks with a special emphasis on data transfer security and the application of
machine learning to replace data in time series data collection. The projects are carried out
within our research laboratory on the premises of the Faculty of Electrical Engineering,
Mechanical Engineering and Naval Architecture, University of Split. With the University of Split,
we are already successfully cooperating on implementing student practice with the University
Department of Professional Studies.
Traffic and Logistics Data Science Lab at the Faculty of Transport and Traffic Science,
University of Zagreb, has continued with its successful work. A special contribution was made
in cooperation between the faculty and our company through the implementation of a project
in collaboration with students and data preparation and analysis for certain studies and joint
solutions in commercial tenders in the domain of traffic.
The research team continued to work on analyzing the large amount of data, and during the
year worked on projects for application of machine learning and artificial intelligence, paying
special attention to personalized medicine and application in predicting fires, with an
additional focus on soil analysis in the area where fire can develop in correlation with the
impact of other weather conditions. Research was carried about the possibility to apply
homomorphic computers to perform artificial intelligence algorithms on the network edge. The
results of a research project in the application of the Internet of Things in the domain of
environmental control, with a concrete case of testing drinking water and other types of
freshwaters were transformed into a commercial project, and the research was expanded, and
the work continued on the research and development (IRI) project, financed from the EU
structural fund for the control of water eutrophication in rivers and the quality of drinking water
in water supply systems. Last year the industry research stage was completed, and the
experimental development started. A very successful cooperation was realized with Ericsson
global research unit in the development of technologies for a digital twin in the business
environment for industry application, based on the Internet of Things, with a highlight on
managing knowledge. Joint work resulted in a well-accepted conceptual demo for the
presentation of the work of a digital twin for management in an industrial environment.
During the year, we have continued to work with our partners within the Centre of Research
Excellence for Data Science and Cooperative Systems that we are a part of. We worked with
partners on the preparation of the start of digital innovation hubs operation, which will be co-
financed for the next three years by the EU and by the country for the domain of artificial
intelligence application in healthcare (EDIH AI4Health) and smart urban environment (EDIH
Adria). Through hubs we will create an ecosystem in the development of new technologies and
the application of innovative technology in local environments.
We have continued a research project in Split that has been researching analytical methods for
connecting heterogeneous types of data, with the purpose to better predict and create AI in
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the field of enrichment of available sensor data, and with the purpose of reaching a more
precise and faster conclusion, decreasing the number of necessary physical sensors, reducing
communication capacity and saving energy. In terms of research of large amounts of data, we
cooperate on two projects of the Croatian Science Foundation in Split. New methods for
heterogeneous data correlation were established in order to enable fast searching and
reaching conclusions based on the available data types.
Successful industry research continued on three projects co-financed by the European
Structural Fund within the Competence Center for Smart Cities (CEKOM), led by the City of
Rijeka. Our company is a partner along with other 20 members. We lead two projects, and
through development in these projects, create prototypes and new technologies for smart city
management, from infrastructure to traffic: all for the purpose of a more economic and
“greener” management, as well as greater satisfaction and lower costs for citizens. Over the
year, the industry research finished, and experimental development started in the practical
application of technology in partner organizations.
We have successfully held Ericsson Nikola Tesla’s 21st Summer Camp at our locations in
Zagreb and Split, where 48 students from 15 institutions of higher education from Croatia and
the region participated. They worked on 17 projects and were mentored by 34 experts from
the company and universities. In addition, eight members of the steering board regularly
controlled the implementation and technological progress of all projects. All the projects gave
an interesting confirmation of research concepts, and the students were pleased with the work
and the obtained results. On the last day of Summer Camp, the presentation of the projects’
results was held for all the interested company’s employees. As many as 30 students continued
to work with us on development projects in the company’s development teams, and a small
number of them continued with the research project. Part of the projects’ results was applied
for further development of our own solutions for the market.
We have published several articles in magazines and at conferences, and during conferences
(SoftCOM, MIPRO) we have organized events that were hosted by our researchers.
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Important events 2022
January-March
A new contract was signed with HT Mostar, worth more than MHRK 11, related to
management of software and licenses for Ericsson solutions in HT Mostar’s network. By
implementing this contract, HT Mostar will be able to use the latest software versions of
Ericsson solutions, as well as a simplified and more agile management of network elements.
Within the initiative “Women in Technology” that is also supported by Ericsson Nikola
Tesla, an online lecture was held at the Company’s headquarters about the possibilities of the
Central Healthcare Information System of the Republic of Croatia, that was developed and is
continuously updated and maintained with new functionalities by Ericsson Nikola Tesla’s
experts. The lecture was aimed at senior-year female students at schools of medicine in order
for them to gain a better insight in the contributions and advantages of using modern ICT
technology and its application in health care.
At the annual “Hrvoje Požar” award ceremony of the Croatian Energy Association and
“Hrvoje Požar” Foundation, Ericsson Nikola Tesla was awarded the annual award in the
category for the Realized Project of Rational Energy Management for the project “Increasing
energy efficiency and using renewable energy sources at Ericsson Nikola Tesla d.d.”.
Ericsson Nikola Tesla Group’s 2021 business results were published: the Group realized
a successful business performance and achieved excellent results, record revenue and growth
in all markets.
In cooperation with Ericsson Nikola Tesla, Crnogorski Telekom put 5G network in
commercial operation in Podgorica, which makes Crnogorski Telekom the first operator in
Montenegro to put 5G network into commercial operation. Dynamic Spectrum Sharing (DSS)
technology was implemented which enables the dynamic use of current radio frequencies and
this means that in the area covered by 5G signal, users can use their 4G or 5G devices in the
same frequency range.
A contract was signed in Sarajevo between BH Telecom and Ericsson Nikola Tesla,
worth HRK 14.8 million, and the contracted activities encompass an upgrade of a part of BH
Telecom’s core network, as well as the necessary services of implementation and integration.
The Contract was signed for a five-year period.
Ericsson Nikola Tesla and the Slovenian company Realis informacijske tehnologije, as a
Bidding Consortium, have signed a contract with Hrvatske ceste worth HRK 3.9 million. This is
a project that establishes a national access point for multimodal information in transport, as
well as develop a route guide as part of the provision of multimodal information services in
transport.
A consortium comprising Ericsson Nikola Tesla and King ICT signed a new three-year
framework agreement with the Ministry of the Interior of the Republic of Croatia on the
maintenance of the emergency call system worth HRK 13.5 million.
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Ericsson Nikola Tesla Group
Gospić General Hospital marked a decade of using the Hospital Information System.
This event was attended by the representatives of Ericsson Nikola Tesla, a company that
developed, implemented and has been providing maintenance for this system for Gospić
General Hospital.
At the conference “Water on the Palm of the Hand”, a representative of Ericsson Nikola
Tesla spoke about the company’s expertise in the field of water ecosystem monitoring and
presented ICT solutions that we have been developing for this purpose. Their main aim is
monitoring, visualization and analysis of water quality parameters.
Ericsson Nikola Tesla representative participated at the conference “3T Tourism, Travel
& Tech” and held a lecture “Crowdsourcing Methods in Participative and Sustainable
Development of Tourism”, highlighting the importance of synergy of society, environment and
the economy.
At the conference “Automate business!”, the company’s representative presented the
automation of the business process for managing standard operating procedures in the Agency
for Medicinal Products and Medical Devices of Croatia (HALMED), a part of the overall Digital
archive information system that our company implemented in 2014. Our solutions serve as a
repository for more than 5 million documents with more than 8.7 TB of data.
The greatest value that this system provides is the quality of documentation management,
which is one of the foundations in business quality certification and receiving high marks from
external regulatory bodies, which HALMED has been continuously achieving and is ranked at
top of European national agencies for medicinal products.
We have responded to UNICEF’s call for solidarity with children and families of Ukraine
in providing financial aid for taking care of them, which was also accompanied by a significant
financial donation to Croatian Red Cross for the same purpose.
April-June
With the operator HT Mostar, we have signed a new contract worth more than MHRK
16, thus continuing a long-term successful cooperation. The contracted services include
providing support for the maintenance of Ericsson’s solutions in fixed and mobile network of
HT Mostar until the end of 2023.
The Company’s representatives participated at the third conference “5G Day”, organized
by the Croatian Regulatory Authority for Network Industries (HAKOM) in Zagreb and
presented the latest Ericsson radio units and the application of 5G networks in the industry.
Ericsson Nikola Tesla experts took part in an international conference in Dubrovnik - VII.
Croatian Congress on Cadaster & Land Administration Domain Model 2022 workshop and
presented two papers: “Managing Land Data using the Joint Information System of Land
Registry and Cadaster (JIS)” and “Toward Croatian utility registration implementation model
based on LADM“.
Ericsson Nikola Tesla participated as the gold sponsor at the 6th Symposium of PhD
students of Faculty of Science.
City Red Cross Society, Croatian Institute for Transfusion Medicine and Ericsson Nikola
Tesla, organized another voluntary blood donation event at the company's premises in Zagreb.
Our experts participated at the JobFair 2022 and held a lecture about the employment
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perspective in 5G, a workshop about full stack app creation, and presented many possibilities
of 5G and IoT by using a popular LegoCity model.
The company’s representatives participated at the 6th Dump Days in Split.
As part of a pilot project, companies Ericsson Nikola Tesla and Odašiljači i veze (OIV)
implemented a private 5G network at a factory in the Šibenik-Knin County.
At the 27th conference DORS/CLUC 2022 - Days of open computer systems, Ericsson
Nikola Tesla’s experts presented the project WaterQ which deals with the digital
transformation of water quality monitoring.
At the 10th JavaCro conference our expert held a lecture titled “ZUP IT system for the
analysis of General Administrative Procedure Act implementation.”
The representatives of Ericsson Nikola Tesla participated at the 45th MIPRO conference,
of which the company is a long-term partner. During the panel discussion “Smart and green
Croatia -How to achieve it?”, the company’s president talked about the company’s internal
initiatives and processes through which we take note of our own impact on the climate and the
environment. Ericsson Nikola Tesla was the holder of two thematic consultations - Artificial
Intelligence Systems, and Software and System Engineering. Our experts from various areas
presented papers about irreplaceable tokens, application of GDPR, IoT for Active and Healthy
Ageing, Operations Wisdom Logging. A joint paper “The Challenges of Digitalization at Unije
Island” was also presented with L. Perinić (Regional Energy Agency Kvarner, Rijeka, Croatia),
and M. Jarak (WWF Adria, Zagreb, Croatia).
A member of Ericsson Nikola Tesla’s executive management participated at Greencajt
on the panel titled “Go green and keep clean – are corporations ready for changes?”.
Ericsson Nikola Tesla opened an office in Rijeka, and during the opening ceremony
which was attended by numerous guests as well as high representatives of local and regional
bodies, members of the academia and businessmen, we have signed a cooperation agreement
with the Faculty of Humanities and Social Sciences in Rijeka.
At the Gallery Modulor of the Cultural Center Trešnjevka, a joint exhibition of Art and
Photography group of Ericsson Nikola Tesla’s employees and pensioners was held.
A member of the executive management participated at Lider’s conference “Sustainable
Finances”, where she spoke about social responsibility as the company’s strategic direction.
A member of Ericsson Nikola Tesla’s executive management represented the company
at “Trade Finance” workshop organized by Privredna banka Zagreb and Croatian Chamber of
Economy.
The Annual General Meeting of Ericsson Nikola Tesla joint-stock company was held on
June 27, 2022, at the company’s headquarters in Zagreb, Krapinska 45. For the participation
in the work of the Annual General Meeting, 66.57 percent of the Company’s equity capital was
registered, which was sufficient for the Annual General Meeting to reach valid decisions.
At the official award ceremony of the Digital Innovation Incubator, where Ericsson
Nikola Tesla was a strategic partner for the ICT area, awards were presented to the best young
innovators. Our company received a recognition for contributing to the development of young
people’s creativity and entrepreneurship.
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Ericsson Nikola Tesla Group
July-September
Graduation workshop (DIRA) of the Department of Electronic Systems and Information
processing was held for the 13th time at the Faculty of Electrical Engineering and Computing,
and our company sponsored the second prize.
Ericsson Nikola Tesla delivered an ICT solution for digitalized monitoring of water in the
area of Hutovo Blato.
Within the Innovation Academy organized by UNICEF, at the end of August the
company was visited by more than 40 students from various high schools.
In August and September, Ericsson Nikola Tesla contracted more than HRK 46 million
worth of business. With the Ministry of Justice and Public Administration, we have contracted
activities related to the upgrade of the information system of land registry and cadaster. With
the State Geodetic Administration on the basis of a two-year framework agreement, we have
contracted the basic and expanded maintenance of the Infrastructure Cadaster System. In
cooperation with the Ministry of the Interior, we have continued to work on the maintenance
of the system for monitoring the state border of the Republic of Croatia. With the City of Split,
the activities have been contracted for the communication infrastructure relocation.
The 21st edition of Ericsson Nikola Tesla Summer Camp finished. During Summer Camp,
approximately 50 students from 14 faculties successfully completed their work on 17 projects
in the Big Data domain with the support of 33 mentors.
Our employees participated in the UNICEF campaign Milky Way.
The delegation of Ericsson Nikola Tesla participated in the fifth Western Balkans Digital
Summit (WBDS) held in Pristina.
At the conference “Why is paternity leave important?”, a member of the company’s
executive management presented the company’s paternity leave concept as an example of
good practice in Croatia.
We have celebrated 40 years of successful business of Ericsson Nikola Tesla’s office in
Split, which today employs almost 700 experts, thus representing the largest concentration of
highly educated experts in ICT in Split-Dalmatia County. On this occasion, we donated
electroacoustic verbotonal devices to the Center for upbringing and education “Slava Raškaj”
in Split. These devices are used for individual speech therapy and speech development
exercises for children with speech and language disorders.
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Ericsson Nikola Tesla Group
October-December
At the 14th Sustainable Development Conference, the most successful Croatian
companies were awarded the Croatian Index of Sustainability (HRIO) Awards, and Ericsson
Nikola Tesla was awarded in the category Sustainable Corporate Governance.
Our company’s representative participated at this year’s JumpIT Forum.
Organized by the Agency for Electronic Communications and Postal Services of
Montenegro (EKIP), Budva hosted the 19th International regulatory conference titled “Current
and future regulatory challenges, harmonization with the European regulatory frame”, where
our experts held a lecture during the session “Experiences related to 5G implementation,
increase of networks and services availability, QoS and QoE of networks and services”.
Ericsson Nikola Tesla’s representatives took part in the 11th KosICT (Kosovo ICT) in
Pristina, where they held a lecture about “High employee rating in ICT industry: How to achieve
and retain it“, and “5G from SW developer perspective“.
Ericsson Nikola Tesla participated at the fourth Open Doors Day and Career Day
(DOVIK) at the Faculty of Electrical Engineering, Computer Science and Information
Technology Osijek (FERIT).
At the end of September and at the beginning of October, the 6th Croatian Congress for
School and University Medicine was held in Split, as well as the 21st the EUSUHM (European
Union for School and University Health and Medicine) Congress. The representative of our
company held a lecture “National Croatian eHealth system (CEZIH) as enabler for public health
improvement“.
The company’s representatives participated at the Croatian Healthcare Employers
Congress, held for the 125th time. The Congress was organized by the Croatian Healthcare
Employers Association in Vodice, under the auspices of the President of the Republic of Croatia.
During Congress, the representative of the ministry of Health and our company’s
representative spoke about electronic healthcare record, who jointly presented the project that
aims to increase the use of electronic healthcare record.
Business weekly Lider initiated in 2016 the project Lider Invest as part of which the best
production investments in Croatia are awarded. At the official award ceremony for 2022, the
company received the ECO Lider Invest, an award for the investment that most contributed to
sustainable development and the quality of life of citizens, as well as to the protection of
premises and the environment, for the investment in the new Data Center.
Crnogorski Telekom and Ericsson Nikola Tesla signed a five-year agreement worth EUR
12.5 million (approximately HRK 95 million) in Podgorica. This represents a continuation of a
successful long-term cooperation in the field of Crnogorski Telekom’s mobile network
maintenance, improvement and modernization.
Ericsson Nikola Tesla’s experts presented three papers at the 15th Symposium of
Chartered Geodetic Engineers “Geodesy and Waters” within the session “Modern cadaster and
physical planning”. The Symposium was organized by the Croatian Chamber of Chartered
Geodetic Engineers (HKOIG) in cooperation with the Council of European Geodetic Surveyors
(CLGE) and the European Spatial Data Research (EuroSDR).
In cooperation with the Financial Agency (FINA), the magazine Gloria gave awards to
the most successful women of Croatian business across various industries and most successful
companies managed by women. Ericsson Nikola Tesla was awarded based on business results
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Ericsson Nikola Tesla Group
for 2021 in the category IT&Tech.
Ericsson Nikola Tesla representatives participated at the first Career Day at the
University of Rijeka – UNIRI Career Days.
At this year’s 53rd counseling of Croatian archivists with the topic Digitalization, in a
lecture “Experiences from the eCulture project– digitalization of cultural heritage”, our
company’s experts presented the business and technical architecture of the entire system, from
the digitalization of archival material in the archives to the publication on the national portal
eCulture and the European portal Europeana.
With the operator HT Mostar we have signed new contracts worth more than MHRK 57
for the upgrade and expansion of LTE RAN network, and for the expansion of the transmission
network.
We participated at Career Day at the Faculty of Science and Career Day at the Faculty
of Mechanical Engineering and Naval Architecture.
UNICEF office for Croatia and the Advisory Board for Children's Rights and Corporate
Social Responsibility held the conference “What do young people need to be more competitive
in the labor market?”. A member of Ericsson Nikola Tesla’s executive management talked
about the opportunities that we provide for young people to develop competitiveness in the
labor market.
Ericsson Nikola Tesla’s representative participated at the 16th medical conference
Future is Now in Bratislava and presented the business practice and practical examples of how
technology can help solve problems and improve public health indicators.
We attended the official ceremony of marking the Day of FER where, for the 24th time,
Ericsson Nikola Tesla awards were presented to the three best papers in the field of
telecommunications. This award is an award with the longest tradition that a company has
been awarding to FER students.
At the conference about corporate governance organized by Hanfa and Jutarnji list,
Ericsson Nikola Tesla was awarded the recognition for the best compliance with the Code of
Corporate Governance in 2021.
Ericsson Nikola Tesla representatives participated at the event “Swedish Day”,
organized by the Swedish Embassy and the Faculty of Economics and Business in Zagreb. The
company’s representative participated in a panel “Path towards sustainability & innovation”,
where she explained the way in which Ericsson Nikola Tesla contributes to the development of
the society and economy.
At this year’s award ceremony of the Zagreb Stock Exchange, Ericsson Nikola Tesla
received the Building Public Trust Award for the most transparent reporting, awarded by PwC
Croatia in cooperation with the Zagreb Stock Exchange.
By signing a contract worth more than HRK 65 million, Kosovo Telecom and Ericsson
Nikola Tesla started their cooperation related to the modernization of core and radio network
and the maintenance of the network of this Kosovo operator. This contract encompasses the
modernization and virtualization of the entire core network, introduction of the state-of-the-
art equipment in the radio part of the network and the implementation of Kosovo international
code 383 in the network.
The company donated money to purchase food for the users of Saint Joseph soup
kitchen in Zagreb, Centers for the Homeless of the Most association in Split, Soup kitchen of
Caritas in Osijek, and charity association Duga in Vukovar.
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A company’s representative participated at the marking of the 5th anniversary of the
Center for Information Technologies of the University of Mostar - SUMIT and held a lecture
“Synergy of the academic community and the economy”.
We have signed contracts in the field of society's digital transformation with the Ministry
of Justice and Public Administration of the Republic of Croatia, Croatian Health Insurance
Fund, and in cooperation with the company Securitas Hrvatska we have signed a contract with
the Ministry of the Interior.
First Advent celebration held at ENT Group brought joy to many customers and business
partners, employees and especially the little ones who got to experience Children's Day
organized for the children of the company’s employees.
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Memberships, initiatives
By participating in the work of various professional associations, organizations, scientific
institutions, etc., the Group’s experts enable the transfer of knowledge and experience and
contribute to a more efficient representation of certain positions and realization of goals in a
specific area, regarding an issue, crisis, etc.
Here are just a few:
- Croatian Employers’ Association
- Croatian Chamber of Economy
- Lider’s Club of Exporters
- Croatian Business Council for Sustainable Development (HR PSOR)
- Croatian Standards Institute
- IEEE Institute (Institute of Electrical and Electronics Engineers)
- PMI Croatia
and many others.
Initiatives
Ericsson Nikola Tesla participates in the following socially important initiatives and platforms:
- UNICEF’s Think Tank on Children’s rights and CSR
- HR PSOR Diversity Charter, etc.
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Financial highlights 2022
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Ericsson Nikola Tesla Group
Balance sheet structure (in MHRK)
Operating profit (in MHRK), Gross margin, ROCE and ROS (in percentages)
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Ericsson Nikola Tesla Group
Development of liquid financial assets and operating profit (in MHRK)
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Ericsson Nikola Tesla Group
Change in liquid assets (in MHRK)
Sales revenue by market (in percentage)
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Ericsson Nikola Tesla Group
Financial performance in 2022
Damir Bušić,
Director Finance, Sourcing
and Commercial
Management
In the last year's review on the achieved financial results of Ericsson Nikola Tesla Group for
2021, we had recognized the influences and risks that we have expected to affect business
operations in 2022. Primarily, this was an unstable geopolitical situation accompanied by
sanctions, inflation accompanied by an increase in the prices of goods, raw materials, energy
and labor costs combined with problems in supply chains. The listed risks proved to be a reality
during 2022, and we focused on their mitigation and timely adjustment in order to achieve our
strategic directions and goals for 2022.
The achieved results for 2022 show that we are firmly on the outlined path and that we do not
allow the situation development related to recognized risks to hinder us from achieving good
and quality results, which is a prerequisite to continue good business performance in the
coming years.
Due to war in Ukraine and EU sanctions against Belarus, we have terminated the contract for
the eHealth implementation project for the Republic of Belarus, and all new sales activities on
this market were stopped. The remaining activities are coming to an end and are under strict
supervision. Due to such circumstances, already from the first quarter of 2022 we have focused
more on other export markets and domestic market, with the intention of finding new business
opportunities to compensate for the decline in sales caused by sanctions and the slowdown in
investments by our customers.
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Ericsson Nikola Tesla Group
In addition to the efforts to seize new business opportunities in accordance with our strategy,
we have also seized the moment to see the aspects of our own business from the new post-
pandemic perspective, and to continue implementing the necessary optimization. We
continued to digitalize all aspects of business operations that also make it easier to exercise
the legal right to work remotely, and wrapped up by optimizing resources in our company in
Belarus. These were the required steps by which we create the necessary preconditions to
additionally increase internal efficiency and cost effectiveness which, along with a continuous
investment in knowledge and competencies of key employees and constant monitoring of the
Group's processes, contribute to better profitability.
Ericsson Nikola Tesla Group's performance indicators in 2022 are influenced by the
termination of a significant contract with a Belarusian customer, and despite this they show
an increase in sales by 1.7% from HRK 2,203.9 to HRK 2,242.1 million. This is primarily the
result of stability and further growth in Ericsson's market and sales in the Digital Society
segment in the domestic market. Gross margin reached 8.2% and is also influenced by the
termination of the Belarusian contract, as well as by the increase in labor costs, energy, raw
materials, and goods, which leads to a drop in operating profit compared to the previous year
by 31.1% to HRK 128.5 million. If the one-off impact of the termination of the eHealth
implementation contract in Belarus is excluded, gross margin is 9.7% compared to 11.5% in
2021, while the operating profit is 15% lower and amounts to HRK 158.4 million.
Timely recognition, assessment and mitigation of situations bearing risk are an integral part of
the risk management process and system at the Group level. We believe that competent and
proactive employees are the company's most valuable assets, and the backbone of protection
against threats and risks in business. Investing in our employees, in their knowledge and
skills, innovativeness, efficiency and quality in key areas, is the basis of business continuity and
sustainable development, and we will continue to do so in 2023.
In accordance with our plans to secure new contracts, we have intensified our work on new
business opportunities. This, together with the implementation of the highest standards in our
ethics and compliance programs, resulted in a slight increase in selling and administrative
expenses by 2.5% to HRK 95.1 million. The share of selling and administrative expenses in sales
revenue is at the level of the previous year and amounts to 4.2%. Financial income is most
influenced by the movement of market prices on investments in financial assets and is lower
than last year's also due to the absence of interest yield after the expiration of certain long-
term customer financing contracts, amounting to HRK 3.8 million. The amount of net profit of
HRK 119.2 million is in line with the expectations for the year, and the same applies for the
5.3% return on sales.
The financial positions of the balance sheet for the Group have not changed significantly
compared to 2021. The increase of 4.3% was largely generated by a slight increase in
receivables and cash on the asset side and increase in liabilities to suppliers on the short-term
liabilities side, as a result of regular business activities during 2022. We consider that the stable
balance is the result of our effort to always respect the guidelines in the following areas: (i)
strengthening the company's cash flow by generating business and monitoring its collection,
(ii) implementing projects while optimizing costs and working capital, (iii) securing new
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Ericsson Nikola Tesla Group
contracts within our focus areas, in accordance with the set plans and strategy, (iv) overall
optimization of the company's costs and management of business critical investments, and
(v) further improvement of our ethics and compliance program and building a company culture
based on integrity and moral principles. Adhering to these guidelines in their daily work and
when fulfilling the set goals, our employees through their experience and focus on the key
areas mentioned, ensure continuous quality, sustainability, results and competitiveness, thus
preserving our position as a technology leader in Croatia and on our export markets.
We continue to focus on potential new, as well as already recognized existing risks. We are
mastering the conversion from HRK to EUR without any major difficulties. Coming up next is
making the planning, budgeting, and presentation of achieved results for the current year in
our new currency a routine.
We feel confident to face all the challenges that the year 2023 may bring us in order to continue
creating added value for all our stakeholders.
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Ericsson Nikola Tesla Group
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
In 2022, share price decreased by 7.34% to HRK 1,705.00. At the end of 2022, Ericsson Nikola
Tesla’s market capitalization was MHRK 2,270.5 (end of 2021: MHRK 2,450.2). As regards the
free float market capitalization, Ericsson Nikola Tesla is ranked ninth on the Zagreb Stock
Exchange, with MHRK 1,139.2, which represents 3.15% of the total free float market
capitalization. At the end of 2022, Ericsson Nikola Tesla’s share weight in CROBEX Index was
9.9%. According to regular turnover in 2022, Ericsson Nikola Tesla’s share is ranked seventh
on the Zagreb Stock Exchange with a turnover of MHRK 82.9 (2021: MHRK 84.1). In block
transactions, additional MHRK 6.8 were traded (2021: MHRK 33.5).
The company won the “Building Public Trust Award” for the most transparent reporting,
awarded by PwC Croatia in cooperation with the Zagreb Stock Exchange. Furthermore, the
company was awarded the recognition for the best compliance with the Code of Corporate
Governance among the issuers on the Regular Market of the Zagreb Stock Exchange awarded
by the Croatian Financial Services Supervisory Agency.
Share price and turnover
2018
2019
2020
2021
2022
Highest (HRK)
1,240
1,415
1,530
1,950
2,040
Lowest (HRK)
976
972
1,020
1,500
1,415
Last - end of year (HRK)
1,010
1,400
1,500
1,840
1,705
Turnover (in MHRK)
-
39.3
58.0
121.1
84.1
82.9
within the orderbook
Turnover (in MHRK)
-
-
-
5.3
33.5
6.8
block transactions
trade volume - within the
36,116
49,652
93,010
50,525
47,841
orderbook
trade volume
-
block
-
-
3,500
19,638
4,171
transactions
Dividend per share
70.6 HRK
49 HRK
82 HRK
64 HRK
6 EUR*
* As proposed by the Management Board and Supervisory Board
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Ericsson Nikola Tesla Group
ERNT-R-A share turnover and average price trend in 2022 (in HRK)
3.500.000,00
2.100,00
2.000,00
3.000.000,00
1.900,00
2.500.000,00
1.800,00
2.000.000,00
1.700,00
1.600,00
1.500.000,00
1.500,00
1.000.000,00
1.400,00
500.000,00
1.300,00
0,00
1.200,00
Turnover
ERNT-R-A average price
Average ERNT-R-A share price trend 2018 - 2022 (in HRK)
2.200,00
2.000,00
1.800,00
1.600,00
1.400,00
1.200,00
1.000,00
800,00
I 2018.
XII 2018.
XII 2019.
XII 2020.
XII 2021.
XII 2022.
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Ericsson Nikola Tesla Group
Capital market in 2022
2022 was the most turbulent year for the world economy since the 2008 financial crisis. Many
risks, such as the energy crisis, record inflation, a noticeable slowdown of the world's leading
economies, tightening of monetary policy and geopolitical tensions resulted in the decline of
the leading share indices. The value of the American index S&P 500 decreased by 19.4%, while
EURO STOXX 50 decreased by 11.7%. In response to rising inflation, the central banks around
the world have started an aggressive cycle of increasing reference interest rates. This
particularly hit the technology sector, whose valuations are significantly more dependent on
the movement of interest rates than an average company. Thus, the technology index Nasdaq
recorded a loss of 32.51%.
In the domestic market, the year started with excellent trade statistics and a positive market
dynamic, however February and the beginning of conflict in Ukraine brought intense trading,
with corrections of indices and market capitalization. The rest of the year brought mainly
positive sentiment, and thus the year ended with only -1,5% correction of share turnover within
the orderbook, while the total share turnover was as much as +21.7% compared to the previous
year. The performances of indices varied: from -8.4% as recorded by CROBEX10 to +52.5% as
recorded by CROBEXtransport.
ERNT-R-A share price development as compared to Zagreb Stock Exchange share indices in
2022
15%
10%
5%
0%
-5%
-10%
-15%
-20%
-25%
ERNT
CROBEX
CROBEX 10
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Ericsson Nikola Tesla Group
Share capital
As at 31 December 2022, Ericsson Nikola Tesla joint-stock company had a share capital
amounting to HRK 133,165,000 distributed in 1,331,650 ordinary registered Class A shares.
Each share carries one vote at the company’s General Meeting. The total number of treasury
shares at the end of 2022 was 10,011, representing 0.75% of the share capital. The shares
were owned by 6,607 shareholders.
Shareholders
Ericsson Nikola Tesla d.d. major shareholders as at 31 December 2022
Shareholders
Number
%
of
of share
shares
capital
Telefonaktiebolaget LM Ericsson
653,473
49.07
PBZ d.d. / Raiffeisen mandatory pension fund, B category
123,514
9.28
Erste & Steiermarkische Bank d.d. / PBZ Croatia osiguranje
40,490
3.04
mandatory pension fund, B category
OTP banka d.d. / Erste Plavi mandatory pension fund, B category
27,618
2.07
Raiffeisenbank Austria d.d. / Raiffeisen voluntary pension fund
18,360
1.38
PBZ d.d. / custodian client account
10,449
0.78
Ericsson Nikola Tesla d.d.
10,011
0.75
OTP banka d.d. / OTP Index fund – open-end alternative
9,761
0.73
investment fund with public offering
PBZ d.d. / Raiffeisen mandatory pension fund, A category
6,523
0.49
PBZ d.d. / The Bank of New York as custodian
5,503
0.41
Other shareholders
425,948
32.00
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Ericsson Nikola Tesla Group
SUSTAINABLITY REPORT
Environment, Social, Governance
(ESG)
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Ericsson Nikola Tesla Group
About the Sustainability Report
This sustainability report describes Ericsson Nikola Tesla Group’s CSR activities in 2022. It
encompasses information about strategy, approach, goals, policies, management,
implementation, risks and opportunities relevant for significant aspects and impacts of the
Group’s business performance related to the environment, society and corporate governance,
presented in a transparent and material manner. The report and additional information are
available on the website of the parent company and subsidiaries of Ericsson Nikola Tesla
Group.
Report scope and limits
All the information and data mentioned in the report, unless stated otherwise, relate to
activities and projects undertaken from 1 January 2022 to 31 December 2022. The report
encompasses the activities undertaken by Ericsson Nikola Tesla d.d. as the parent company
and all its subsidiaries in Croatia and abroad. The 2022 Annual Report provides information
about the structure, the nature of ownership, legal form, subsidiaries as well as changes in the
size, structure and financial results of the Group. The previous report was published in April
2022, and it comprised data for 2021. This sustainability (non-financial) report has not been
subject to an external verification.
Reporting principles and framework
In all segments of our business, sustainability and social responsibility principles are applied.
The Group reports on its sustainability and the impact of corporate responsibility in line with
globally recognized standards and principles in order to provide stakeholders with all the
required information about the Group’s activities in this area. This report has been prepared in
line with the recommendations from GRI (Global Reporting Initiative) Standards.
The Group also reports on its progress in the field of human rights, environment, and anti-
corruption in line with the UN Global Compact principles. The principle of stakeholder
engagement, sustainability context, materiality and completeness, as well as response and
impact, help the Group to define the content of the sustainability and social responsibility
report. In order to ensure the quality of reporting, the Group applies principles of accuracy,
balance, clarity and timeliness.
Additional information about the Group and its social responsibility is available at
www.ericsson.hr/en/homepage, where you can find the entire Annual Report.
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Ericsson Nikola Tesla Group
Statements about the future
Certain topics that are explored in this report and include statements relating to the future are
subject to risks and uncertainty. Those who read this content should be warned that such
statements have no guarantee, and future actions and developments may fundamentally
differ from the described or implied ones. We expressly deny the responsibility to update the
statements relating to the future after publishing the report.
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Ericsson Nikola Tesla Group
UN Goals
1 No Poverty
Regular and transparent payment of all taxes and contributions to the state budget and local
government, ensuring thereby functioning and development of all activities which are
important to the community, including taking care of the socially most vulnerable groups.
2 Zero Hunger
The company secured food for the most vulnerable social groups in Zagreb, Split, Osijek, and
Vukovar.
3 Good Health and Well-being
We continue with intense activities in the field of e-Health by implementing a three-year
contract for the support, maintenance and upgrade of the central part software of the integral
Central Healthcare Information System of the Republic of Croatia with the Croatian Ministry
of Health; a contract with the Croatian Health Insurance Fund for the procurement of
adjustment and migration services of the CEZIH application system and associated data from
the old hardware and software base in the SSC and testing and parallel operation of the
existing system and the new system, and further informatization of secondary healthcare
protection in several hospital systems. When we talk about taking care of employees, we
secure regular medical checkups for all our employees. Moreover, we take care about their
physical and mental health through our PrevENTion program.
4 Quality Education
By engaging students in concrete projects in the company, as well as projects in cooperation
with the academia (Summer Camp and other activities) we achieve synergy potential for all
stakeholders. We participate in defining educational programs and contribute to their
improvement. Academic education is also in focus internally: in the parent company, the
percentage of highly educated employees accounts for 96.1% of the total number of
employees, while at Group level it accounts for 86.3%. There is continuous investment in the
development of knowledge and skills of the existing and new employees.
5 Gender Equality
We carry out activities in all segments of the society with the aim of eliminating prejudice and
stereotypes, encouraging interest in STEM professions, while at the same time promoting the
importance of equal participation of women in the ICT sector and leadership positions. The
representation of women in the company is 60% in the Supervisory Board and 28% among
managers, while at Group level, 26% of women hold managerial positions.
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Ericsson Nikola Tesla Group
6 Clean Water and Sanitation
The project WaterQ IRI2 which deals with risks and estimation of impacts of drinking water
on people’s health, entered into its final implementation stage i.e., experimental development.
In the project’s final stage, an installation of the entire system is performed (WaterQ sensor,
platform and mobile app) on pilot locations in the public water supplies (Water Supply Krk, Sinj
and Ploče) and small-scale water supplies. It is especially important to highlight the pilot
locations in small-scale water supplies Kalinje, Žumberak and Radočaj Brodski. Due to the
inaccessibility of the public water supply, these communities are developing their own
distribution system, and our system provides the population with an insight in the quality of
drinking water and enables them to share data with public health institutions.
7 Affordable and Clean Energy
In our business operations, we use energy from renewable energy sources. We use waste heat
from data center cooling to heat offices. We participate in the EU HORIZON project INSULAE
with the aim of developing and implementing innovative solutions for energy self-sufficiency
and decarbonization of islands in the European Union. Three islands were selected, and one of
them is the Croatian island Unije. This project contributes to the implementation of the
initiative “Clean Energy for EU Islands”, helping to create action plans for the islands in order
to produce cheap and sustainable energy. The plan is to reduce fossil fuel consumption on the
islands by 11% through wide implementation of solutions created in the project.
8 Decent Work and Economic Growth
We provide our employees with a pleasant working environment. We encourage them to
participate in lifelong learning, in order for them to stay competitive in the labor market during
their entire career, and we ensure fair, regular and competitive salaries. We have continued
to work to increase the existing comprehensive program of benefits.
9 Industry, Innovation and Infrastructure
In global Ericsson teams, we work on 5G-related solutions as the most important open
innovation platform for the development of digital society and take over new responsibilities
for the improvement of quality of our strategic partners’ telecom infrastructure. Furthermore,
we have also been working on many research and development projects in Industry 4.0 in the
field of transport, environment, etc. In addition to the fact that, as an industry we are not in the
category of significant polluters, we help other industries to achieve better quality monitoring
of all the environmental parameters and manage their environmental footprint. We are
especially dedicated to water quality monitoring, with an additional focus on industrial waste
waters in all the stages of the production process (intake, production/processing, output). With
our solution “eEnvironment Industry” we monitor all the relevant parameters and enable
management of the overall process of collecting, central storage as well as processing and
reporting in line with GRI and ESRS standards. With this solution, we help the industry make a
simpler transition to the new ESG concept of non-finance reporting, and we provide it with a
tool to make its data relevant, accurate and confidential at any moment.
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Ericsson Nikola Tesla Group
10 Reduced Inequalities
By participating in the work of UNICEF’s Think Tank on children’s rights, we actively contribute
to the development of new possibilities for educating children and youth, especially the
sensitive groups.
11 Sustainable Cities and Communities
For the needs of the town Samobor, we have implemented a system for monitoring
environmental parameters with the aim of reducing the effect of urban activities on the quality
of town life. In its first step, Samobor decided to monitor noise pollution at the playground of
Elementary School Bogumil Toni. The aim of this system’s implementation is to reconcile all
the ways the school playground is used (it is also used by commercial entities). For Hrvatske
ceste, a project for establishing a “National access point for multimodal information in
transport” was successfully delivered. The project supports a change in the transport paradigm
and a transition towards sustainable forms of traffic by encouraging citizens to use public
transportation, especially railroads. A part of the solution is also a route guide that enables
planning an ecologically acceptable multimodal journey by informing the passengers about
available services, prices of service, as well as extraordinary situations, such as traffic delays.
The delivery is a part of the establishment of the digital infrastructure of Hrvatske ceste, as the
foundation for the creation of other services in the future.
12 Responsible Consumption and Production
A considerable part of our services is delivered remotely, primarily in the segment of network
design and optimization, network integration and software upgrade, and we continuously
work on their development.
13 Climate Action
Owing to a significant share of working from home and the increased use of ICT solutions for
remote work, all forms of travel have been reduced, and thus the use of means of transport. In
addition to the increase of energy efficiency and decrease in energy consumption, the company
has also contributed to climate protection by reducing carbon footprint from these two sources.
Our solutions have a significant positive impact on energy consumption and reduction of
carbon footprint of our customers.
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Ericsson Nikola Tesla Group
14 Life Below Water
The system implemented in Elektroprivreda HZHB, which aims to monitor the quality of
surface waters close to the hydroelectric power plants, has proved to be an excellent tool by
which the potential polluter can monitor and report about its impact on the environment in a
transparent way. The system also enables a more quality information exchange among the
industry, the academia, NGOs and local population. Additionally, in joint research activities we
have also tested the application of monitoring of water ecosystems’ health by using a
photospectral analysis of satellite images by using Computer Vision technology and deep
learning algorithms. The minimization of industry’s impact on the environment and
technological progress in line with the principles of society’s sustainable development is
enabled by creating the described ecosystem of stakeholders. Satellite images analysis
provides a clearer picture of water surface pollution on a wider area and throughout a longer
time period, which also enables approximate determination of the source of potential pollution.
15 Life on Land
Environmental sustainability aimed at reducing pollution and preservation of life on land is an
integral part of our business strategy. This is achieved through responsible management of
impacts from our own activities and through a product portfolio with a focus on innovative 5G
solutions that will significantly contribute to the preservation of ecosystems on land.
16 Peace, Justice and Strong Institutions
By developing solutions for the digitalization of land registry and cadaster, cultural heritage,
monitoring of the state green borders, as well as for other security aspects, we provide an
opportunity for more efficient work of institutions and a safer life.
17 Partnerships
We form partnerships with all target groups. We have one of the leading roles and actively
participate in national umbrella institutions that encourage corporate social responsibility:
Croatian Business Council for Sustainable Development (HRPSOR), Croatian Employers’
Association (HUP), Croatian Chamber of Economy (HGK), etc. We cooperate on various
projects with universities and institutes.
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Ericsson Nikola Tesla Group
Our approach to sustainability
The purpose of Ericsson Nikola Tesla Group’s business is to empower an intelligent,
sustainable, and connected world. Sustainability is embedded in all the Group’s activities and
processes and represents a foundation for creating business values. The focus on sustainability
and responsible business helps us to achieve two main goals: creating positive impacts and
reducing all types of risks. We wish to be a responsible and relevant driver of positive changes
in the society.
Sustainability as new value creator
Integration of sustainability and responsible business practice makes the Group’s business
more efficient. Focus on energy efficiency of the products we offer to the market helps the
operators we do business with to reduce the costs of their networks, and also supports positive
social and ecological effects in the society. The aim of our endeavors is to improve all the
characteristics in a business chain, create new value, and make our brand different from our
market competitors.
Responsible and sustainable business
Responsible business is the primary mark of the Group’s long-term strategy, as well as our
company culture. Respecting human rights on all levels of our business is in line with the United
Nations Guiding Principles on Business and Human Rights. We believe that responsible
business and making the right decisions in the whole value chain is crucial for the Group’s
business success. In addition to the team that is responsible for compliance, each Group’s
employee is responsible for implementing compliance in all activities and processes in which
they participate. We form partnerships with all our target groups and do business with integrity
and transparency on all our markets.
Technology as the driver of positive changes
At Ericsson Nikola Tesla, we believe that communication is a basic human need, and that
technology is the key driver of positive changes, which are important for society’s sustainable
development. Therefore, it comes as no surprise that we have been recognized in the society
as a long-term relevant and responsible leader of the digital transformation process.
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Ericsson Nikola Tesla Group
Strategy implementation and harmonization
ICT industry plays an important role in the process of implementing UN Sustainable
Development Goals and fulfilling the obligations foreseen by the Paris Agreement on Climate
Change. In our organization, we use UN sustainable development goals as a platform for the
implementation of concrete activities in order to use technology, knowledge and experience of
our experts to contribute as much as possible in achieving the set goals, thereby bringing
benefits to all the people in the society. By implementing our own Sustainability strategy in all
business activities, we work on the realization of ambitious ESG goals.
Energy, the environment and climate
ICT has a transforming role in providing support to other economy sectors by harmonizing
business growth with a rational use of resources and can greatly contribute to the reduction of
carbon dioxide emissions, as well as to the preservation of clean air, drinking water and other
natural resources.
Commitment to circular economy
In order to increase positive impact on the society, we are dedicated to circular economy,
bringing three key areas into focus:
1 Leadership in energy efficiency and environmental characteristics of products;
2 Ecologically responsible use of materials, waste and water;
3 Reduction of carbon footprint in our activities.
Performance evaluation: Digital engagement
Key part of our Strategy is to enable every person to use the Internet and mobile
communications anywhere and anytime. Along with providing connection on a global scale,
we apply our technology every day; we play the leading role and are innovative in the field of
information and communications technologies, which is the key area of our business activities.
Setting goals
Adjusting our goals to the UN Sustainable Development Goals is more necessary than ever
before because it is an integral part of a quality transformation of the society. To set further
goals and track progress, we use framework and methodology to estimate and describe a
positive effect we bring to society.
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Ericsson Nikola Tesla Group
Impact and risk assessment
With the aim of providing support to business sustainability and social responsibility strategy,
we measure yearly and long-term goals of positive impacts and risk management. There are
two main ways in which we measure our positive impact:
–
activities and projects by which we contribute to sustainable development,
–
reduction of greenhouse gas emissions.
We measure risk mitigation in the following areas:
–
responsible sourcing,
–
anti-corruption,
–
adhering to the rules of responsible sales,
–
occupational health and safety.
The way in which we implement our strategy is described in three sections of the report:
business, environmental and social responsibility.
Business integration
Sustainability and social responsibility are integrated in the implementation of our business
strategy, goal setting and managing business risks. Sustainability and social responsibility
policy, as well as our Code of Business Ethics and Code of Conduct are part of our management
system and are applied in the entire Group.
Monitoring performance
Every year, we report from the perspective of achieving progress in key activities of the
business chain and realizing the most important goals and achievements related to key
material issues in our business. We will continue to be the leader in sustainable development
both in the society and on the markets where we operate. We will also continue to strengthen
the impact of our technology in accelerating activities for achieving global sustainable
development goals.
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Ericsson Nikola Tesla Group
SUSTAINABILITY STRATEGY
Our strategy integrates sustainability and corporate responsibility by creating prerequisites for
an active role in implementing the society’s digital transformation and creation of new value
for all stakeholders. The Group measures and evaluates its ecological, social, and economic
impacts. Work in these areas represents a continuous journey, and strategy implementation
encompasses three main areas:
Responsible business
Ericsson Nikola Tesla Group wishes to continue to develop responsible business practices to
strengthen its position as a reliable partner with all the relevant stakeholders. We are proactive
in numerous activities that encompass much more than complying with the law, and we have
been continuously conducting programs in areas such as human rights, anti-corruption,
occupational health and safety, impact of radio waves on health, as well as responsible
supplier management.
Environmental sustainability
Through a circular economy, we wish to ensure solutions and services that will contribute to
the creation of a new value in Group’s business and positioning on the market.
Digital engagement
By implementing innovative ICT solutions, Ericsson Nikola Tesla Group creates prerequisites
for the availability of Internet for all people.
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Ericsson Nikola Tesla Group
Stakeholder engagement
Our stakeholders are divided into four main categories: customers, shareholders, employees,
and society. The society comprises suppliers, public administration, civil society, non-
governmental organizations (NGOs), industry partners, media, the academia, and the public.
In addition to having a dialog in the areas defined by material topics, in communication with
stakeholders, through various ways of engagement (table Stakeholder engagement), we have
verified their opinions and interests in cooperating with us. Additional interaction was realized
through social networks.
Table: Stakeholder engagement
Stakeholders
Our focus
Ways to engage
Customers
Professionalism
Cooperation on the
introduction of
Partnership in finding the
technology
best solutions
Innovativeness in offering
Regular meetings
comprehensive ICT solutions that
Questionnaires
have
a
positive impact on
business, people’s lives and the
environment, including climate
change
Measuring
customer
satisfaction
Employees
Lifelong
learning and
Development
training
programs
Attractive jobs in ICT sector
Questionnaires about
employee satisfaction
Equal development and
work
opportunities
for
all
Benefit programs and
employees
Bonus Club
Performance-based salary
All Employee Meeting
system
Unit meetings
Motivating
work
environment
High-quality
equipped
workplace
Caring about employee
health
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Stakeholders
Our focus
Ways to engage
Shareholders and
Applying the principles
Individual and group
investors
of corporate governance
meetings
Objective and
timely
ESG Questionnaires
informing about the most
significant activities and achieved
business results from the risk
management aspect
Suppliers
and
Joint efforts to improve and
Regular
inspection
partners
enhance the supply chain
(audit)
in
terms
of
Knowledge transfer
compliance,
quality,
environment
and
occupational health and
safety management.
Seminars
and
workshops
in
anti-
corruption, protection of
health and environment, etc.
Trade union
Partnership
Joint meetings of the
Union and the Management
Consulting and engaging in
Board and Executive
the decision-making process
Management during the
Supporting the union’s work
decision-making process
which includes the care for the
interests of its members
Business
and
Exchanging
knowledge,
Participating
in
professional
experience and good practice
activities of professional
associations
associations when defining
sector norms, standards,
rulebooks, protection of
rights, etc.
Government
Participation in the passing
Engagement
in
bodies
of legislation
various boards
by
representing positions in line
Exchanging ideas
with sustainable
Encouraging
favorable
development demands
business environment
Articulated attitudes
about the current topics in
the public/media
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Ericsson Nikola Tesla Group
Stakeholders
Our focus
Ways to engage
Educational
Support to educational
Research activities
institutions
initiatives through joint projects,
Participating
in
etc.
bodies for improvement of
Transfer of knowledge
programs
for
certain
about the latest technologies
professions
Awarding the students’ best
Holding
laboratory
papers
exercises, technical demos,
lectures
Students’ visits
Participating in
students’ events
Community
Knowledge exchange
Participating in
Support and cooperation in
initiatives for
digital inclusion, STEM jobs
local initiatives
Financial aid
Charity actions
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Ericsson Nikola Tesla Group
Our material topics
In line with future reporting obligations, pursuant to the Corporate Sustainability Reporting
Directive (CSRD), in 2022 we have linked material topics with ESG impacts in a more
significant manner (environmental, social, and governance) in a way that we made them more
traceable and comparable. Moreover, we have placed material topics in a stronger correlation
with risks and opportunities.
The current status and estimation of material topics was first performed internally, within the
team responsible for the annual report and assigned representatives of various company
organizations. Afterwards, we have included various stakeholders in the estimation, through
an individual approach and communication during external evaluations of suppliers, meetings,
questionnaires, etc., and, in line with the findings, we have changed the material topics matrix.
Every material topic as well as its limits, i.e., where in the value chain the impact appears, are
described in this report.
Approach and priorities
Our matrix of material aspects that we have detected as relevant for the Group’s business
performance consists of the following quadrants:
–
we have recognized and actively participate in:
These are the aspects that have been identified as the most significant for the Group and our
stakeholders, so we actively participate in them. We are adapting to and/or are carrying out
new management procedures in order to secure business sustainability and responsibility,
mitigate potential risks and improve positive socio-economic and ecological impacts of, for,
example, ICT solutions, specifically 5G technology as an innovation platform for the
improvement of all industries and people’s lives, cloud computing, artificial intelligence, etc. In
this group special focus is given to topics related to the contribution to the protection of human
health, preservation of natural resources and development of circular economy.
–
we have assessed and are engaged in:
These are the aspects of particular interest to our stakeholders. We monitor them, report on
our results in these areas and, when necessary, continue the dialog.
–
we have assessed/recognized and participate when necessary:
These are the areas we work on with selected stakeholders, when necessary, but we do not
necessarily report on them. We have established procedures by which we strive to ensure that,
in relation to particular topics, we operate in accordance with our stakeholders’ expectations.
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Ericsson Nikola Tesla Group
Focus on selected key material topics
Our business decision for 2022 regarding material topics is that a special focus is given to four
key material topics of additional impact and relevance for our business and environment for
the year mentioned:
-
anti-corruption
-
taking care of health and OHS
-
energy consumption
-
contribution of ICT to low-carbon economy.
We have monitored them according to the new GRI standard and substantiated the required
demands.
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Ericsson Nikola Tesla Group
BUSINESS RESPONSIBILITY
ESG
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Ericsson Nikola Tesla Group
Responsible business
Ericsson Nikola Tesla Group and all its employees have a responsibility and commitment to the
highest level of integrity and ethics in doing business. Integrity and ethics are an integral part
of the company’s culture and an essential characteristic of our everyday Way of Working and
doing business. Operating with a strong sense of honesty is crucial to maintain credibility and
preserve the trust of customers, partners, employees, shareholders, and all other stakeholders.
It is required from all stakeholders that have a contractual relation with the Group, as well as
from all employees, to adhere to the Ericsson Nikola Tesla Group’s Code of Conduct for
Business Partners and the Ericsson Nikola Tesla Group’s Code of Business Ethics in their daily
operations. These documents can be found at: https://www.ericsson.hr/en/company-
governance.
Our management system is the foundation of our Way of Working. We approach our business
activities on the highest levels in the company responsibly, starting with the Supervisory Board,
the Management Board and all the members of the Executive Management.
Our Way of Working
Ericsson Nikola Tesla Group’s policies, directives and processes encompass the following
topics: responsible sourcing, occupational health and safety (OHS), environmental
management, anti-corruption, human rights, trade and sales compliance. Code of Business
Ethics, Code of Conduct for Business Partners, Trade Compliance Policy, Occupational Health
and Safety Policy, and Sustainability Policy are a part of Ericsson Nikola Tesla Group’s
Management System. In this way, we ensure the integration of sustainability and corporate
responsibility into every aspect of our business activities, wherever we do business.
External certification institutes and Ericsson Nikola Tesla Group’s team for operational
excellence and quality regularly verify the way in which we implement our policies and
directives, manage risks and achieve our goals.
Code of Business Ethics
Creating a transparent environment in managing business is the Group’s top priority. We use
our Code of Business Ethics to show our commitment to act honestly and truthfully in our
business activities and our communication with the market. We expect the company to be
managed in line with the principles outlined in this Code. These standards should be met by
everyone: members of the Supervisory Board, the Management Board and the Executive
Management, as well as every individual working for Ericsson Nikola Tesla Group.
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Ericsson Nikola Tesla Group
The Code of Business Ethics reflects the company’s commitment to responsible business
management, including:
– commitments we have as responsible citizens
– respecting human rights in all of our business operations
– occupational health and safety
– promoting sustainable development
– supporting the United Nations Global Initiative, as stated in the Code of Conduct for Business
Partners.
The Code of Business Ethics also contains rules for all the individuals who are performing tasks
in the companies of Ericsson Nikola Tesla Group and for Ericsson Nikola Tesla Group, including:
– ensuring full compliance with the laws, rules and regulations in force
– promoting complete, fair, accurate, timely and comprehensible publication of data in
financial reports and other press releases
– resolving potential conflicts of interests adequately
– protecting and using assets appropriately.
The Code emphasizes our zero tolerance for all types of corruption. All employees are obliged
to read and sign the Code at the moment they become employees of the company and
occasionally during the time spent working for the company.
Code of Conduct for Business Partners
Our Code of Conduct for Business Partners has been drawn up with the purpose of protecting
human rights and promoting fair employment conditions, safety at work, responsible
environmental management and high ethical standards. The Code of Conduct applies to all the
employees, contractors and suppliers. Our suppliers and their subcontractors are also required
to adhere to the Code of Conduct or similar standards, as well as to confirm such adherence.
The Code is based on the ten principles set out in the United Nations Global Compact on human
rights, labor, environment and anti-corruption. Moreover, it emphasizes our objective to apply
the United Nations Guiding Principles in our business.
Organization responsible for compliance
We have embedded zero tolerance for corruption as the leading principle on the highest levels
of the company. Moreover, we have been implementing it throughout all organizational levels,
along with a comprehensive set of rules and processes that all employees must adhere to. Our
Risks and Compliance Board is responsible for the overall management of compliance aspects
in the Group and the implementation of the Ethics and Compliance Program.
Compliance and Investigation Officer, with the help of the team responsible for compliance
and compliance verification, is responsible to propose and monitor the implementation of the
Ethics and Compliance Program elements, as well as to organize Risk and Compliance Board
meetings.
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Ericsson Nikola Tesla Group
Reporting non-compliance
Employees, suppliers, customers and other partners associated with Ericsson Nikola Tesla
Group can report a suspected breach of law or the Code of Business Ethics to the local
executive manager, Compliance Officer or a Person of Confidence, as described on the website:
www.ericsson.hr/en/company-governance.
This website describes the way to submit anonymous reports via Compliance Line. This
Compliance Line is operated by a third party and is available 24/7/365. It is possible to
communicate in Croatian, Bosnian, Serbian, Montenegrin, and English. The anonymous
reporting system is user-friendly. After the report is submitted, the third party delivers it to
Ericsson Nikola Tesla Group which will not have the information about the sender’s IP address
or other metadata. The Compliance Officer receives reports and informs the Risk and
Compliance Board and Audit Committee that determine the ways of further handling the
report.
In 2022, there were no confirmed incidents of corruption.
Education for employees and suppliers
We provide various types of training to secure that our employees and business partners
respect all the aspects of our Code of Business Ethics and Code of Conduct.
– Anti-corruption
In 2022, all active Ericsson Nikola Tesla Group’s employees completed the anti-corruption
course via e-learning app. By providing such continuous education, we aim to increase risk
awareness among all attendants, solve all dilemmas they could have and encourage them to
act properly. We have continued with the introductory anti-corruption courses for new
employees with the purpose of raising awareness of risks, dilemmas, and corresponding
actions.
New Bylaws on Internal Reporting of Irregularities were passed, Persons of Confidence and
their Deputies were elected for three companies of ENT Group (Ericsson Nikola Tesla d.d.,
Ericsson Nikola Tesla Servisi d.o.o. and Libratel d.o.o.). In this way, the possibilities and the
channels to report irregularities were significantly improved, with additional protection of the
person reporting, in line with the new Whistleblower Act.
– Human rights
Since December 2015, we have been carrying out e-learning courses on human rights and
business for all our employees.
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Ericsson Nikola Tesla Group
– Compliance
Our compliance workshops focus on anti-corruption and trade compliance. We held workshops
primarily in the organizational units that are potentially exposed to corruption risks, and
organizational units that, due to their functions, have the possibility to be the first ones to
notice potential breaches.
Advanced workshops titled “Fair market competition, anti-corruption and public procurement”
were held for more than 400 employees who, according to their roles within the Group, could
be exposed to risks.
– Education for suppliers
Free online courses are available to all the suppliers and other stakeholders in four key areas:
code of conduct, anti-corruption, occupational health and safety, and conflict minerals. The
suppliers for which a high level of risk is established during verification for entry into a business
relationship or during the contractual relationship are obliged to prove that they have passed
these courses in order to continue to cooperate with us.
At the beginning of 2022, we have continued with the activities of eliminating or mitigating
risks that were noticed in 2021 when verifying the ethics and compliance of our company in
line with the ABC analysis (Anti-Bribery & Corruption Standards and Framework) that was
performed mid-2021 for Ericsson purposes by the audit company KPMG Germany. In March,
we have fulfilled all the set improvement goals.
From March to July 2022, an independent internal auditor carried out the internal audit
“Efficiency of verifying third-party integrity”. Based on the results of this internal audit, we
have carried out all the requested improvement activities by the end of 2022.
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Ericsson Nikola Tesla Group
Managing business risks
Considering the increasingly demanding conditions of doing business in the markets where it
operates, Ericsson Nikola Tesla Group recognizes the importance and the need to continuously
strengthen its integrated system of managing business risks (Enterprise Risk Management -
ERM) which takes into account and manages the overall risks that the Group is exposed to.
Managing business risks is an integral part of the Group’s Management system, with the task
of a more efficient corporate governance and thereby realizing stakeholders’ goals and
expectations.
Risk and Compliance Board
This body has the main jurisdiction. The work of the Board includes monitoring risks and
compliance as well as ensuring harmonization and risk mitigation. The Management Board,
Executive Management, Risk and Compliance Board and line managers of all the Group’s
organizational units take care to comply with the directives.
The Management Board, Executive Management and Risk and Compliance Board monitor and
regulate the following areas through specific elements:
– Human Resources
compliance regarding labor relations and Workers Councils matters, compliance with the Code
of Business Ethics, reviewing business practice to avoid the risk of employee claims due to
discrimination (sex, disability, age, sexual orientation, religion, etc.), compliance with the laws
on immigration and posted workers, compliance of obligations related to pensions.
–
Finance
preparing and filing statutory accounts with local authorities; compliance with accounting
standards and IFRS, compliance with tax laws and filing appropriate returns to authorities,
compliance with the Group Authorization policy and Code of Conduct, compliance with the
Code of Conduct and the Supply Chain Directive, suppliers’ compliance with the Ericsson Nikola
Tesla Code of Conduct for Business Partners, environmental and occupational health and
safety requirements, suppliers’ compliance with anti-corruption requirements by continuously
screening supplier integrity and requesting due diligence reports.
– Sales & Trade Compliance
sales compliance with the Group’s Sales Directive, handling of approval requests related to
Sensitive Business Areas, as well as Government and Defense business, trade compliance with
local laws, including administration of import/export licenses.
–
Legal
compliance with statutory, regulatory and contractual obligations, requirements in the areas
of Anti-Bribery & Corruption, Competition Law, compliance with Corporate Law, Data
Protection and Intellectual Property Rights.
– General Services
compliance with security directives and other legal obligations pursuant to Croatian laws,
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Ericsson Nikola Tesla Group
compliance with ISO 27001 and ISO 9001, compliance with insurance requirements and
insurance claims notifications, compliance with lease agreements and local laws applicable to
the activities carried out at branch office sites, managing risks related to occupational health
and safety and the environment, demonstrating and auditing compliance with the policy, law
and best practice of occupational health and safety, environmental management and
compliance with ISO 14001 and ISO 45001 standards.
Risk management defines the basic settings to create the Business Continuity Plan that has
the aim to secure business continuity by mitigating risk levels and losses related to Ericsson
Nikola Tesla Group’s business processes and negative consequences for the employees,
Management Board, customers and suppliers.
– Communications & Corporate Social Responsibility (CSR)
Compliance with the Ericsson Nikola Tesla Group’s policies and directives, directives of the
Marketing, Communications and CSR Department, and Croatian laws and regulations
(Securities Market Act, ZSE Rules, etc.), corporate communications and investor relations,
including transparent and fair reporting, managing risks, i.e. perception in relation to the brand,
external/internal and crisis communications, compliance with the donation and sponsorship
directive.
– Business Partner Review Board
Based on the inputs gathered through the screening process performed by Sourcing and
Finance, this Board decides on compliance matters related to business partners with which the
Group or the branch office does, or intends to do, business with. The head of each unit is
responsible for each of the mentioned areas. It is important to highlight that the Board
proposes to the Management Board and Executive Management the decisions regarding the
approval or rejection of business relations with a business partner and/or a specific deal
structure, should it, at the discretion of the Board, be deemed that it would pose a compliance
risk which cannot be mitigated.
Governance &
Strategy
Culture
Risk
Monitoring
management
Assessment
& Treatment
Communication
& Reporting
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Ericsson Nikola Tesla Group
Adequate methods and measures
To successfully manage risks, an integrated approach is needed. By linking organizational
culture, means and practices with strategic goals and their execution, a framework is created
to manage risks in certain scenarios with the aim to create, realize and retain values.
Group’s risk management includes an operational and process dimension, and the primary
risks are defined as:
–
strategic
–
business
–
operating
–
financial
–
security (IT, people, premises)
–
reputational and compliance.
Three lines of defense
Ericsson Nikola Tesla Group’s risk management system has three lines of defense:
– The first line of defense refers to risk owners who are managing risks across certain
organizational units. The holders are line managers, and the risk is related to their area of
operations.
–
The second line of defense refers to functions that monitor risks and functioning of
controls on the first line of defense, and the control of central risk and compliance. The holders
are the Management Board, Executive Management and the Group’s Risk and Compliance
Board, in a way that they support the owners of a certain risk in reaching policies but also help
define goals and actions with risks that are multi-functional. These are the risks that appear in
several different functions at the same time, such as sourcing, sales, payments, safety, quality,
etc. In order for the defense to function, all risk owners must regularly share information about
the status of certain risks with the Risk and Compliance Board which is regularly monitored
and mitigated during the meetings of Executive Management.
– The third line of defense refers to independent internal audit. The holder is an independent
internal auditor. This business function was implemented in the Group in 2021. An independent
internal auditor provides management and supervisory structures information based on a high
level of independence and objectivity within the organization and reports to the Audit
Committee and the Supervisory Board of the Company, as well as to the Risk and Compliance
Board.
A significant role in the overall system and process of risk management and internal control
system is also played by external financial auditors, certification institutes that perform
external audits related to ISO Standard requirements, regulators and other forms of external
supervision (tax supervision, customs supervision, etc.) in Ericsson Nikola Tesla Group.
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Ericsson Nikola Tesla Group
As a confirmation of quality risk management, i.e. corporate governance in the Group, on 02
December 2022, Ericsson Nikola Tesla was awarded the recognition for the best compliance
with the Code of Corporate Governance among the issuers on the Regular Market of the Zagreb
Stock Exchange, according to indicators in 2021. The recognition was awarded by the Croatian
Financial Services Supervisory Agency (HANFA) and Jutarnji list.
Group Risk Management
Top-down Risk
Group Risk
Prime Risks
Identification
Consolidation
Selection
Group/market and customers/business systems risk management
Risk
Bottom-up Risk
Risk Analysis
Risk
Risk Sign-off
Management
Identification
Treatment
Planning
Strategy Development and Deployment Process
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Ericsson Nikola Tesla Group
Corporate governance
Corporate governance describes the way in which rights and responsibilities are shared
between management bodies in accordance with the applicable laws, rules and internal
procedures. Corporate governance also describes the system of reaching decisions and the
structure through which shareholders can directly or indirectly control the way the Company is
managed. Its long-term purpose is to continuously create economic value for all stakeholders.
Management Board and Supervisory Board of Ericsson Nikola Tesla d.d. encourage the respect
of corporate governance principles in order to ensure transparent business, protection of rights
and equal treatment of all shareholders, as well as to strengthen the responsibility towards all
stakeholders.
The Company’s experts continuously, timely and objectively inform the public about all
important business activities and achieved results, thus strengthening the public perception of
a Company that fully implements the Code of Business Ethics.
Good governance of the Company strengthens trust of all stakeholders, credibility towards
customers, partners, employees, shareholders and others, and represents a significant factor
in the company’s competitiveness and long-term sustainability.
Regulation and compliance
Ericsson Nikola Tesla is a joint-stock company with shares listed on the Regular Market of the
Zagreb Stock Exchange, and accordingly, is subjected to various regulations that affect its
governance.
The most significant regulations that apply to us are the following:
-
the Companies Act
the Capital Market Act
-
Zagreb Stock Exchange rules
-
Code of Corporate Governance of the Croatian Financial Services Supervisory Agency
-
(HANFA) and the Zagreb Stock Exchange
-
Applicable rulebooks of the Croatian Financial Services Supervisory Agency (HANFA)
-
Applicable EU regulations.
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Ericsson Nikola Tesla Group
Internal rules
In order to ensure compliance with legal and regulatory requirements and high standards we
have set, Ericsson Nikola Tesla has adopted internal rules, which include:
-
Articles of Association and work procedures of the Company’s bodies
-
Corporate Governance Principles of Ericsson Nikola Tesla
Code of Business Ethics
-
Code of Conduct for Business Partners
-
the Group’s steering documents, including the Group’s rules and directives, instructions
-
and business processes for control and risk management.
Code of Business Ethics
Our Code of Business Ethics summarizes the Group’s basic policies and directives and contains
rules which ensure business with a strong sense of integrity. This is crucial for maintaining trust
and credibility towards our customers, partners, employees, shareholders and other
stakeholders. Everyone who works for Ericsson Nikola Tesla has an individual responsibility to
ensure that business activities are performed in accordance with the Code of Business Ethics.
After they are employed, the employees confirm that they are aware of the principles of the
Code of Business Ethics. This procedure is periodically repeated during their employment.
The Company’s bodies
The General Meeting of a joint-stock company is a place where the shareholders exercise their
legally established rights.
In addition to the members of the Supervisory Board, elected by the shareholders, the
Supervisory Board has an employees’ representative, elected by the Company’s employees.
The Supervisory Board supervises managing of the Company. The Management Board of the
Company consists of one member, appointed by the Supervisory Board. The Management
Board manages the Company’s business under its own responsibility with the support of
Ericsson Nikola Tesla’s Executive Management. General Meeting appoints Ericsson Nikola
Tesla’s external auditors.
An Independent Internal Audit Officer, Compliance and Investigation Officer, Data Protection
Officer (DPO) report on their work to the Audit Committee of the Supervisory Board and Risk
and Compliance Board of Ericsson Nikola Tesla d.d..
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Ericsson Nikola Tesla Group
General Meeting
General Meeting of shareholders decides on the election and recall of the Supervisory Board
members, profit allocation, policy of remuneration and the reports on the remuneration for the
members of the Management Board and the members of the Supervisory Board, discharge
from liability to the Management Board and the Supervisory Board, appointment of an
independent auditor of annual financial statements, amendments to the Company’s Articles of
Association, as well as other issues explicitly defined in the Companies Act and the Company’s
Articles of Association.
At the General Meeting, the decisions are reached by the majority of votes cast (simple
majority), unless prescribed by law or the Articles of Association that it needs a larger majority.
For example, the Companies Act defines that the decisions reached at the General Meeting
related to amendments of the Articles of Association or increase or reduction of the share
capital are to be reached by the votes which represent at least three quarters of the share
capital represented at the General Meeting.
Ericsson Nikola Tesla's General Meeting is held in Zagreb, at the Company's headquarters. The
date, time and place of the General Meeting, together with the respective agenda, is published
on Ericsson Nikola Tesla’s web page no later than a month before the General Meeting is going
to be held, with the extension for the days defined for the application of participating.
The shareholders who cannot participate in person at the General Meeting can exercise their
right to vote by proxies. All documentation related to the General Meeting is available in
Croatian and English.
The shareholders attending the General Meeting are entitled to ask questions which relate to
the Group’s business performance. In general, the majority of the Supervisory Board,
Management Board and Executive Management members is present at the General Meeting
to answer such questions. External auditor attends the General Meeting.
Ericsson Nikola Tesla’s General Meetings in 2022
The Regular General Meeting of the company Ericsson Nikola Tesla d.d. was held on June 27,
2022, at the company’s headquarters in Zagreb, Krapinska 45. For the participation in the work
of the Annual General Meeting, HRK 88,648,800.00 of the share capital was registered,
corresponding to 66.57 percent of the Company’s total share capital.
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Ericsson Nikola Tesla Group
In line with the published Agenda, Ericsson Nikola Tesla joint-stock company General Meeting
adopted the following Decisions:
-
the Supervisory Board’s report on the supervision performed in 2021 was adopted.
-
It was decided that the Company’s net profit for the financial year 2021, amounting to
MHRK 115,206,994.95 will be allocated into retained earnings. The amount of HRK
10,000,000.00 from 2020 retained earnings will be allocated to reserves for treasury
shares. The Company’s shareholders will be paid a dividend of HRK 64 per share from
the retained earnings from 2020 and retained earnings from 2021. The dividend
payment will be affected on 22 July 2022 (payment date) to all the Company’s
shareholders who had the Company shares registered on their securities account in the
Central Depository & Clearing Company on 01 July 2022 (record date).
-
the Company’s Management Board was given consent to allocate up to 5,000 treasury
shares to the Company’s employees
Remuneration Report for Supervisory Board members and Management Board in 2021
-
together with the Independent limited assurance report on the Remuneration Report of
Ericsson Nikola Tesla d.d. was approved
the Company’s Managing Director, Gordana Kovačević, as well as the Chairperson and
-
the members of the Supervisory Board were discharged from liability for exercising their
duties in 2021
-
a decision was reached on the re-election of the Supervisory Board member Franck
Pierre Roland Bouétard, Ericsson Regional Head for France, Algeria, Tunisia, Belgium
and Luxembourg, as well as Head of Orange, Altice and Iliad global accounts.
-
it was decided that KPMG Croatia d.o.o. is re-appointed as the auditor for the Company’s
business performance in 2022.
In 2023, the Regular General Meeting of Ericsson Nikola Tesla d.d. will be held on June 14 at
the Company’s headquarters, Krapinska 45, Zagreb. Additional information is available at
Ericsson Nikola Tesla’s web page.
Supervisory Board
The main task of the Supervisory Board is to supervise the managing of the Company’s
business. Ericsson Nikola Tesla’s Supervisory Board consists of five members, appointed for a
four-year term with the possibility of re-election. Four members of the Supervisory Board are
elected by the Company’s General Meeting, and one is elected by employees.
In its work, the Supervisory Board shall apply high ethical standards and take into account
interests of the Company and its shareholders.
The Company’s Management Board has regularly informed the Supervisory Board on all
important business activities and course of business operations, as well as of all other items
that the Supervisory Board asked for.
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Ericsson Nikola Tesla Group
The Supervisory Board reports to the General Meeting on the supervision of business
operations, approves the consolidated and non-consolidated annual financial statements for
the year, gives the opinion on the Management Board proposal on the profit allocation and
proposes the appointment of the Company’s Auditor to the General Meeting.
Rules of Procedure of Ericsson Nikola Tesla’s Supervisory Board are available at Company’s
web page https://www.ericsson.hr/company-governance.
Work of the Supervisory Board in 2022
Pursuant to the provisions of the Croatian Companies Act and Ericsson Nikola Tesla d.d.
Articles of Association, the Supervisory Board of Ericsson Nikola Tesla d.d. monitored the
managing of the Company's business operations, taking respective decisions and conclusions
at four regular and two extraordinary Supervisory Board meetings held during 2022.
In 2022, the members of the Supervisory Board were:
-
Franck Pierre Roland Bouétard (Chairperson)
-
Olgica Spevec (Deputy Chair)
-
Ana Vrsaljko Metelko (Member)
-
Petra Vranjes (Member, on December 30, 2022, she resigned with effect as of January
01, 2023)
-
Vladimir Filipović (Member and employees' representative until November 29, 2022)
-
Petar Šimundža (Member and employees' representative since November 29, 2022)
There was full attendance of the Supervisory Board members at the meetings, except for the
meeting held on February 3, 2022, when Petra Vranjes was absent.
The Company’s Management Board regularly informed the Supervisory Board on all important
business activities, assets and liabilities positions, revenues, and the course of business
performance.
At regular meetings, the Supervisory Board discussed business environment, risk management,
activities with the customers, focus areas, strategic projects, realization of targets and financial
performance. Further topics of discussion encompassed investments, compliance, significant
business transactions that include the Company and its related parties, as well as issues
regarding human resources and shareholders. The Supervisory Board has been regularly
informed about the development of business and responsibilities of the Research &
Development Center, Customer Services and Solutions Center, Center for ICT solutions for
Digital Society, IT & Engineering Services Unit, and the daughter company Ericsson Nikola
Tesla Servisi d.o.o.
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Ericsson Nikola Tesla Group
At extraordinary Supervisory Board meetings, the members discussed targets for 2022, impact
of crisis in Belarus on the Group’s business activities and results in 2022, approval of annual
financial statements for 2021, dividend proposal for 2021, and the Remuneration Report for
Supervisory Board members and Management Board in 2022.
Based on a continuous focus on retaining, developing and attracting people to secure business
continuity, the Company’s Supervisory Board supported the Management Board proposal to
allocate MHRK 10 from retained earnings from 2020 for the program of purchase of treasury
shares that will be used to pay a part of the bonus as well as an award for the Company’s
employees. Furthermore, the Management Board was given consent to allocate up to 5,000
treasury shares to the Company’s employees. The Company’s General Meeting approved the
above proposals.
In March 2022, a strategic workshop between the Management Board and the Supervisory
Board was held, at which the strategic directions for the next five-year period were analyzed
in detail and concrete guidelines for the further development of the company were proposed.
During the year, the Supervisory Board has been continuously informed about the progress of
each strategic direction.
The Supervisory Board strongly supported the activities on strengthening ethics and
compliance business practice in order to secure that the Company meets the highest standards,
in line with the Code of Business Ethics of Ericsson Nikola Tesla Group. Ericsson Nikola Tesla’s
Compliance and Investigation Officer regularly informed the members of the Supervisory
Board about the reported compliance concerns, vetted third parties with indicated risks,
evaluations of conflicts of interest, compliance trainings for employees and improvements
done after risk assessments.
The Supervisory Board also focused on the efficiency of the risk management system and
internal control. Based on the recommendation of the Audit Committee, which was based on
the independent internal and external audits of the management system, the Supervisory
Board concluded that Ericsson Nikola Tesla Group has an efficient and strong integrated
system of managing business risks - Enterprise Risk Management, with concrete measures for
improvement.
The Supervisory Board conducted a self-assessment of the effectiveness, competences and
composition of the Supervisory Board and its Audit Committee, as well as the performance of
individual members. Furthermore, the Supervisory Board assessed the efficiency of
cooperation with the Management Board and the adequacy of the support and information it
receives from the Management Board. The evaluation was performed by the Supervisory
Board itself, without the engagement of external advisors. The tools for assessment included
detailed questionnaires and discussions.
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Ericsson Nikola Tesla Group
The overall conclusion is that Ericsson Nikola Tesla’s Supervisory Board and its Audit
Committee performed well, had sufficient knowledge and experience, and were efficient in
performing their tasks. Especially strong is open communication with the Management Board,
continuous support to the Management Board in overcoming various challenges, dedicated
and responsible work of each Supervisory Board member, unanimity in decision making
process and the diversity of the Supervisory Board members in term of their qualifications and
gender representation. Furthermore, the Supervisory Board dedicated a lot of time to quality
strategic discussion, risk management and compliance, and monitoring of financial results.
In the forthcoming period, the Supervisory Board will continue to monitor strategic directions
and provide support to the Management Board and Executive Management in overcoming
business challenges, will maintain focus on profitability and other key financial indicators as
well as business risks. Furthermore, it will continue to strengthen the communication of
Supervisory Board members with the Company's shareholders to receive feedback about their
expectations.
The Management Board assessed its own effectiveness in 2022 and presented its conclusions
and future plans at the Supervisory Board meeting. The Supervisory Board members agreed
with the self-assessment of the Management Board and thanked the Management Board for
successfully managing Ericsson Nikola Tesla Group in challenging 2022.
In 2020, the Supervisory Board set a target percentage regarding the representation of
women; namely 40% of women in the Supervisory Board and 30% in the Executive
Management, among managers and at the level of the entire company in the next five years.
At the end of 2022, the representation of women in the Supervisory Board was 60%. At Group’s
level, the representation of women in Executive Management was 23.5%, among line
managers, program & project managers 26%, and among the total number of employees 25%.
Analyzing the reports of the Management Board and monitoring the development of key
financial indicators, the Supervisory Board assessed that Ericsson Nikola Tesla Group had a
successful business performance in 2022, despite a challenging geopolitical and economic
environment. An increase in sales revenue was achieved owing to sales growth in services to
Ericsson and sales in the Digital Society segment in the domestic market. During 2022, the
Group was focused on the realization of many projects related to modernization and
expansion of telecommunication networks and digital transformation of the public and private
sector, quality delivery and new responsibilities from Ericsson corporation, as well as finding
new business opportunities in order to partially offset the impacts of sanctions imposed on
Belarus on business results. With the aim of continuation of stable business performance, the
Group remains focused on its strategic directions, risk management, cost efficiency, as well as
further strengthening of the company’s culture based on integrity, ethics and compliance.
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Work of the Audit Committee
The Audit Committee is a subcommittee of the Supervisory Board. Ericsson Nikola Tesla’s Audit
Committee Charter is available at the Company’s web page:
https://www.ericsson.hr/en/company-governance.
During 2022, the members of the Audit Committee were: Olgica Spevec (Chairperson), Vesna
Vašiček (Member) and Petra Vranjes (Member). There was full attendance of Audit Committee
members at the meetings.
The Audit Committee held five meetings in 2022, during which it discussed the financial
performance during the year and annual financial statements, audit plan for 2022, internal and
external audit findings, high-level risks, quality control and risk management system, issues
regarding compliance and safety and performed other tasks defined by Audit Act and the Audit
Committee Charter.
The Audit Committee met regularly with external auditors to review the audit plan and
findings, audit fee as well as the Report on the audit of the financial statements. It evaluated
the performance of the external auditors and enquired into their qualifications, independence
and objectivity. After negotiations with external auditors, the Committee approved audit fee
for 2022. It also pre-approved all non-audit services provided by the external auditors.
The Committee monitored the activities and approved Operational Excellence, Development
& Quality team and Independent Internal Audit plan for 2022. The Committee
reviewed Ericsson Nikola Tesla integrated system of managing business risks – Enterprise Risk
Management (ERM) based on the “Three Lines of Defense” model, in which there is the
Independent Internal Audit function as the “3rd Line of Defense”. Risk management, internal
controls and compliance requirements have been checked during 2022 by independent
internal audits and assessments, as well as by external audits of Ericsson Nikola Tesla Group
Management System. Based on the outcome of the mentioned audits and assessments, the
Committee concluded that Ericsson Nikola Tesla Group has efficient risk management system
at all organizational and functional levels.
With respect to compliance, the Committee decided about the reported compliance concerns.
It evaluated and monitored Ericsson Nikola Tesla Group Ethics and compliance program
activities with the special focus on tracking improvements after anti-bribery and corruption
risk assessments conducted internally and externally. The Audit Committee opinion is that
Ericsson Nikola Tesla Group has well established and efficient compliance procedures.
Based on the recommendation of the Audit Committee, the Supervisory Board proposed to the
General Meeting of Shareholders the appointment of KPMG Croatia as the auditor of Ericsson
Nikola Tesla d.d. for 2023.
The Audit Committee regularly presented its conclusions and recommendations to members of
the Supervisory Board.
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Remuneration policy for the Supervisory Board
When defining a remuneration model for work of the Supervisory Board members, various
external and internal factors were taken into consideration, such as the Company’s position
and opportunities, practices of local companies in telecom industry, as well as the policies of
salaries and remunerations in the Company and Ericsson Nikola Tesla Group.
The remunerations of the Supervisory Board members are independent of the Company's
results and do not include a variable part of compensation. Each member of the Supervisory
Board is entitled to receive a monthly remuneration amounting to half of the average monthly
gross salary paid in the Company in the month for which the remuneration is paid. The member
of the Supervisory Board, who is also a member of the Audit Committee, additionally receives
a monthly amount 500,00 EUR. The members of the Supervisory Board have the right to
reimbursement of appropriate expenses incurred during the performance of their duties.
However, they are not entitled to severance pay, additional payments from the Company or
the Company’s subsidiaries, or the right to participate in the plan of awarding shares.
The reimbursements paid to individual members of the Supervisory Board in 2022.
Gross 1 (HRK)
Olgica Spevec
Member; Deputy Chair
167,415.40
Ana Vrsaljko Metelko
Member
123,391.93
Vladimir Filipović
Member and employees'
121,094.36
representative
A member of the Audit Committee Vesna Vašiček, for each meeting she attended, is entitled to
receive a remuneration amounting to half of the average monthly gross salary paid in the
Company. In 2022, a total of gross 1 amount of HRK 42,426.11 was paid to Vesna Vašiček.
The members of the Supervisory Board who are connected to the largest single shareholder,
LM Ericsson/are the employees of the company from Ericsson Group, elected at the General
Meeting of Shareholders, give up the right for remuneration, in line with the policies of their
employer.
The Company did not provide any advance payments or loans to the members of the
Supervisory Board, and there are no financial obligations of the Company towards the
members of the Supervisory Board.
The Company did not give any gifts or benefits to the members of the Supervisory Board.
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Management Board
The role of the Management Board in the management of the Company's business is defined
by the Companies Act, Articles of Association and internal rule books of Ericsson Nikola Tesla
d.d. The Management Board is obliged to consciously perform its duties, taking into account
the Company’s and its shareholders’ interests. Ericsson Nikola Tesla has a one-member
Management Board, a Managing Director appointed by the Supervisory Board for a five-year
term, with the possibility of re-election. Gordana Kovačević, Managing Director of the
Company since January 1, 2005, was reappointed at the end of 2019 for another, fourth term
in office.
The Management Board has the following non-transferable rights and obligations:
-
to develop, discuss and approve the Company's strategy and business plan and to
ensure its application.
-
to regularly inform the Supervisory Board on financial and business results, strategy and
business plans as well as other issues which are important for the Company’s business
and position.
to ensure the basis for managing business and for that purpose adopt appropriate acts
-
and standard business procedures.
-
to organize consistent accounting and financial control in accordance with applicable
regulations and financial planning.
-
to determine the business organization, to appoint and recall the members of the
executive management with the purpose to establish an effective organizational
structure and to determine the principles of their remuneration.
-
to supervise whether the work of executive management is in line with the relevant legal
provisions, Articles of Association of Ericsson Nikola Tesla, decisions and general
enactments issued by the Management Board and the business plan.
to evaluate first line managers and ensure succession and development plan.
-
-
to prepare, in accordance with the Croatian Companies Act as well as other current
regulations, the report on business performance and to warn of deviations in the actual
business development compared to the previously defined plans and goals and to state
the reasons for this.
-
to inform the Supervisory Board on all detected non-compliance and agree upon the
measures that must be implemented.
to organize the Annual General Meeting of Ericsson Nikola Tesla joint-stock company
-
and execute the adopted decisions.
The Management Board is obliged to take into account the best interest of the Company and
may not, while making decisions, be driven by personal interests or use the Company’s business
opportunities for itself. The Management Board is obliged to immediately inform the
Chairperson of the Supervisory Board on the conflict of interest.
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Remuneration policy for the Management Board
The remuneration and reward of the work performed by the Management Board is focused on
sustainable growth and development of the Company and are carried out in line with the
Remuneration policy for the Management Board, adopted by the Supervisory Board and
approved at the Company’s General Meeting, held on June 29, 2021.
The amount of basic (contract) salary is determined based on responsibility level, complexity
of tasks, size of organization, diversity of business segments and technologies involved, taking
into account companies in the labor market, relevant in terms of core business, size, and
complexity. Monthly contract salary is agreed upon in individual employment contracts.
Annual target salary includes the contract salary and the variable component for achieving the
annual business targets at the Commitment level. Annual target salary is reviewed once a year
and, if necessary, adjustments are made under the condition that there are assets in the budget
secured for this purpose.
In addition to fixed basic salary, annual target salary for Management Board also includes a
variable component, which depends on the performance, i.e. on the Company’s achieved
business goals. STV (short-term variable pay) bonus scheme is used for Management Board.
The bonus is used to reward the achievement of the Company’s targets, mainly financial ones,
over the course of one year.
The Management Board’s goals are defined in line with the Company’s business goals which
have been approved for a certain year and strategic determinants of the future business
development. The ratio of the fixed basic annual salary and the annual bonus within one
annual target salary for the Management Board is 80:20. In case defined goals are achieved
on the Stretch level, the ratio is 67:33.
Allocation of treasury shares
If treasury shares are allocated to the Management Board, such allocation is based on the
decision made by the Company’s Supervisory Board, usually for a period of 3-4 years, and is
conditioned by exceptionally good results in the past period, i.e., high expectations for the
coming period.
Additional benefits of the job
In addition to the above components, compensation includes other additional benefits.
Additional benefits are non-monetary benefits and services provided by the Company as well
as receipts in kind, e.g., company car, meals in the company, medical check-up for the
Management Board, severance pay when leaving the company, various education, etc.
Remuneration paid to the Management Board in 2022
In 2022, the following gross 1 amounts were paid to Gordana Kovačević, the Management
Board: fixed annual basic salary of HRK 2,482,044.00, annual bonus (short-term variable)
of HRK 1,014,410.43. Additional benefits of the job (company car, meals in the company, etc.)
amounted to HRK 70,761.17. During 2022, the Management Board was not allocated any of
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Ericsson Nikola Tesla Group
the Company’s own shares.
Executive Management
Ericsson Nikola Tesla’s Executive Management consists of the Managing Director and directors
of the main organizational units.
The Managing Director is responsible for management of the daily business and in her work is
supported by other members of the Executive Management.
Executive Management:
- defines the strategy and policy and establishes a strong corporate culture.
-defines goals for operational units, allocates resources and monitors the performance of
particular units.
- ensures operational excellence and achieves synergy through efficient organization.
Additional information on the members of the Executive Management and their remunerations
can be found in the chapter under the title Profile of the parent company and its subsidiaries
and Note 29.b. “Key management compensation” of the consolidated financial reports.
Ericsson Nikola Tesla Group Management System
Ericsson Nikola Tesla Group’s management system encourages corporate culture and ensures
management of business operations:
-
to meet the goals of Ericsson Nikola Tesla’s main stakeholders (customers, shareholders,
employees);
-
within defined risk limits and with reliable internal control;
-
in accordance with relevant laws, Code of Corporate Governance and stock exchange
rules.
Ericsson Nikola Tesla Group Management System is a framework consisting of rules and
requests related to the Group’s business performance, defined by described processes and
organization, policies, guidelines and instructions. Management System is based on ISO
9001:2015 (international standard for quality management), ISO 14001:2015 (international
environmental management standard), ISO 45001:2018 (international occupational health
and safety management standard) and ISO 27001:2013 (international information security
management standard), but it is designed as a dynamic system which enables the Group to
adapt the system to varying requirements and expectations, including the new legislation as
well as customers’ and other stakeholders’ requests.
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Management system is a prerequisite for operational excellence that results in an increased
customer satisfaction, reduced costs, and an increased competitiveness.
Members of the teams for operational excellence/development and quality carry out internal
control of processes and activities. The focus is on improving the integrated management
system, executing strategy, managing business processes, reporting and managing
performance.
Target realization is also secured by the competent functions and boards, established pursuant
to legal requirements, requirements of Ericsson Corporation and the needs of the company
and/or requirements of Ericsson Nikola Tesla’s Management Board.
At the Group’s level or within individual companies of the Group, the following
functions/committees were established, for example:
-
Data Protection Officers
-
Persons of Confidence and Deputies to Persons of Confidence
-
Compliance and Investigation Officer
-
Independent Internal Audit Officer
-
Operational Excellence, Development and Quality Manager
-
Occupational Health and Safety (OHS) Board
-
Ericsson Nikola Tesla Group Security Board
-
Risk and Compliance Board
-
Investment Board of Ericsson Nikola Tesla Group
-
Crisis Management Task Force for COVID-19
-
Committee for Receiving and Resolving Complaints Related to Dignity Protection of
Employees of Ericsson Nikola Tesla d.d.
-
Company’s Secretary of Ericsson Nikola Tesla d.d.
-
Ericsson Nikola Tesla’s R&D Croatia Operational Steering Group
-
Distributorship Agreement Governance for the distribution of Ericsson products,
solutions and services
-
Postgraduate Management Board of Ericsson Nikola Tesla
-
Innovation Steering Committee
-
Steering Committee for Real Estate Program
-
Technology Management Board
-
Digital Transformation Program Board
-
Steering Committee for Activities of Nikola Tesla BY d.o.o.
-
Steering Committee for Activities of Nikola Tesla d.d. - Branch office Kosovo
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Ericsson Nikola Tesla Group
In implementing its strategy and achieving business goals, the company is faced with various
risks daily. The Management System takes these risks into consideration and enables their
timely identification, analysis and assessment, as well as taking appropriate preventive
measures to eliminate or mitigate them. Risk management is incorporated into all business
segments and all operative processes through the Management System, with the aim to
ensure:
-
Responsibility
-
Effectiveness
-
Efficiency
-
Uninterrupted business
-
Compliance with corporate governance, legal and other requirements.
Managers of all the Group’s organizational units, together with the employees, actively
participate in the risk management process.
Independent internal audit
Internal audit as a business function was established in ENT Group in 2021. This function is
carried out by an independent internal auditor. The activities of an independent internal
auditor are carried out in line with the requirements defined by the Rulebook on the
Independent Internal Audit of ENT Group. An independent internal auditor submits regular
quarterly reports about these activities to the Company’s Audit Committee and Supervisory
Board and the Risk and Compliance Board.
External auditors
External independent auditors, appointed by the General Meeting, perform the annual audit of
financial statements and business reports to ensure an independent, objective opinion on the
way the financial statements are prepared and presented. The independent auditor's report to
the General Meeting is an integral part of the Annual Report.
KPMG Croatia d.o.o. was again chosen as the Company’s auditor for 2022.
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Ericsson Nikola Tesla Group
Chairperson of the Supervisory Board
Franck Pierre Roland Bouétard
(elected in 2018, re-elected in 2022)
Regional Head for France, Algeria, Tunisia, Belgium, and Luxembourg, as well as Head of
Orange, Altice and Iliad global accounts.
Graduated from Ecole Nationale Supérieure des Télécommunications (Télécom Paris) and
graduated from IFA (Institut Français des Administareurs) at Sciences Po Paris.
Board member of Swedish Chamber of Commerce in France, Article 1 association and Telecom
Paris engineering school.
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Ericsson Nikola Tesla Group
Deputy Chair of the Supervisory Board; Chair of the Audit Committee
Olgica Spevec
(independent member, elected in 2019)
Director of the Amplus Consult Ltd, Zagreb
2014 - 2022
Business consultant, Director of the Amplus Consult Ltd, Zagreb
2003 - 2013
President of the Competition Council in the Croatian Competition Agency
2000 - 2003
Deputy Minister of Economy
MSc of Economy, University of Zagreb - Faculty of Economics, Croatia
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Ericsson Nikola Tesla Group
Supervisory Board member
Ana Vrsaljko Metelko
(independent member, elected on June 29, 2021)
Attorney, Law Office Ana Vrsaljko Metelko, Zagreb
as of September 2020 –Ana Vrsaljko Metelko Law Office; as of March 2021, in cooperation
with Ostermann and Partners LLP Law Firm, Zagreb
2008 - 2020 Žurić i Partneri Law Firm: Partner 2017-2020
2006 - 2007 Tankerska plovidba d.d., In-house Lawyer, Legal and Insurance Sector
Graduated at Law School, University of Zagreb
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Ericsson Nikola Tesla Group
Member of the Supervisory Board and Audit Committee
Petra Vranjes
(elected June 29, 2021, on December 30, 2022, she resigned with effect as of January 01,
2023)
During her term as a member of the Supervisory Board, she held the position of Head of
Finance and Business Control Segment Digital Services Ericsson AB
Graduated Finance at the University of Stockholm, Sweden
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Ericsson Nikola Tesla Group
Member of the Supervisory Board and employees' representative
Vladimir Filipović
(elected in 2018, member until November 29, 2022)
Project Manager in R&D Center of
Ericsson Nikola Tesla d.d.
Business and Quality Development
Graduated in Electrical Engineering, Department of Telecommunications; Master of
Economics; Department of Informatics Management; University of Zagreb
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Ericsson Nikola Tesla Group
Member of the Supervisory Board and employees' representative
Petar Šimundža
(member as of November 29, 2022)
System Software Engineer
Ericsson Nikola Tesla d.d.
Graduated in Electrical Engineering, Telecommunications, Faculty of Electrical Engineering,
Mechanical Engineering and Naval Architecture, University of Split
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We respect human rights
Ericsson Nikola Tesla Group respects and supports human rights, and we do this by conducting
business in line with our Code of Business Ethics, and expect equally high standards from our
employees, suppliers, and partners.
In its business operations, Ericsson Nikola Tesla Group adheres to the UN Guiding Principles
on Business and Human Rights (UNGPs) and has developed concrete quality practices. In
everyday activities, this can be seen in mandatory application of the Code of Business Ethics
for everyone working for the Group, under the Group’s executive management or on its
premises, whether they are an employee, a subcontractor, or a private contractor.
We are aware that violations of human rights impact people’s lives, the community,
environment or property, and thus we have been continuously investing to broaden the
practical implementation of human rights protection through our policies and process, as well
as improvements in responsible and sustainable business behavior. Due to this, we have been
continuously working to identify potential negative impacts on human rights and undertake
preventive measures to eliminate them. We would also like to highlight that by adhering to
health and safety measures we are contributing to avoiding negative impacts on the right to
life, right to a safe work environment and the right to physical and mental health.
When doing business, we adhere to the following guidelines in terms of human rights:
When hiring, we are guided by the principles of human rights protection, not
discriminating based on work experience, personal life experience along with individual origin,
race, sex, ethnicity, sexual orientation. All candidates have to sign adherence to our ethic
principles. Furthermore, we also ensure adaptation to working conditions to people with
disabilities.
We encourage mutual respect and an open dialog among employees.
We undertake measures for employee protection from intimidation, sexual harassment,
and other forms of abuse from other employees or external persons, such as customers, sellers
and clients. We provide support to employees who claim that they are exposed to intimidation,
sexual or other abuse.
When determining salary and awards, we are guided by objective facts and ensure a fair
and transparent promotion and career development options.
We respect the right to family life by adhering to legislation and providing various forms
of support to parents.
Furthermore, we know that diversity encompasses many aspects: cognitive perspectives,
education, work experience, personal life experience along with individual origin, race, sex,
ethnicity, sexual orientation etc. We respect and promote diversities and highlight them as
advantages in interpersonal relationships, teamwork, doing business and thereby nurture an
inclusive company culture. By respecting the opinion of each individual and the freedom of
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expression, every year we conduct a questionnaire, Voice, and gain valuable feedback in order
to continue to build a company culture where individuals feel welcomed and can freely express
their opinion. We are proud that year after year, the results of the questionnaire have been
confirming a high level of employee satisfaction by the respect they are shown, the Company’s
ethics and compliance, as well the employees’ sense of belonging to the company.
As a socially responsible company sensitive to complex life situations of certain groups of
society, we have often been taking part in various charity actions over the years. Last year we
responded to UNICEF’s call to solidarity with children and families of Ukraine in providing
financial aid for taking care of them.
Last, but not least, we would also like to highlight our strategic decision to cooperate with
business partners and other stakeholders that share our values regarding human rights and
our insisting on the responsible use of technology, since we are aware of the potential risks of
ICT services and solutions abuse. In this way, we can avoid potential harmful effects that we
might cause, to which we could contribute, or that could be linked to our business, products, or
services.
It is our responsibility to take care of all the aspects of human rights protection while
developing products and services, and, subsequently, during their application. We achieve this
by continuously investing in training and raising awareness of employees and business
partners as well as by working in an ethical way and conducting in-depth reviews.
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Protection of personal data
In addition to undoubtedly numerous positive changes in terms of better connectivity of
systems and people, the technological revolution also brings some new security risks and risks
for personal data protection. Apps, connected devices and integrated networks become
potential targets for various misuse, cyberattacks and theft of personal data or identity.
Therefore, security and protection of personal data are priorities in technologies and services
provided by Ericsson Nikola Tesla Group.
Respecting the fact that nowadays websites are one of the most important communication
channels, Ericsson Nikola Tesla Group’s information on personal data processing is available
at the link at the bottom of every page, regardless of its content. Thus, we make available all
the necessary information related to the processing and protection of personal data of various
data subjects in a transparent, simple and fast way.
The Group has a Data Protection Officer whose task is to monitor compliance with the personal
data protection rules. Data Protection Officer is also the point of contact for all questions
related to personal data protection. Furthermore, Data Protection Officer is the head of a
virtual privacy team that consists of information security experts.
Depending on the category, sensitivity and purpose, limited access to personal data in the
Group is available to managers and employees of specific units in the measure necessary to
perform their duties. Moreover, it is available to suppliers who are entrusted with personal data
processing under a corresponding processing agreement, and third parties who have a valid
legal basis for processing personal data.
Controlling the collection and further processing of personal data is a mandatory part of
operating practice, carried out through a special monitoring system, which also includes
consistent protection of personal data and regular and specific audits of key processes. In
2022, the Group worked on the improvement of controls for personal data protection to make
them more integrated, proactive and adjusted to the Group’s processes and its portfolio of
products and services.
All our employees have been educated on the need and significance of respecting the right to
personal data protection, which is included in the Code of Business Ethics, the basic document
defining the behavior we expect from all our employees. In 2022, the Group has additionally
increased the activities of employee education, specially by carrying out tailor-made education
for certain departments and their employees, taking into consideration concrete processing
and personal data categories they come across.
Before hiring suppliers, the Group identifies the project’s sensitivity and importance, and carries
out due diligence of suppliers and solutions they intend to offer to the Group, which also
includes checking security and personal data protection. In 2022, the Group invested
additional efforts to check suppliers, i.e., third parties in general.
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Ericsson Nikola Tesla Group
Due to the nature of our business, we have additional responsibility to efficiently address
personal data since the analysis of an enormous amount of data generated by today’s
communication networks may create permanent benefits for the society. The most effective
way to realize this potential is to apply innovative technologies with strict adherence to the
principles of personal data protection, whereas the results must bring benefits for all
stakeholders.
In 2022, there were no confirmed incidents of personal data breach. This means that the Group
has efficiently eliminated risks of minor security incidents and prevented them from escalating
to a higher severity level, i.e., violation of personal data.
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Information security
Information and communications infrastructure has an important role in the society and
business activities. Large amounts of various information have been continuously processes,
exchanged and stored on various ICT systems. Every day, we are exposed to threats and risks
of growing cybercrime, and the awareness on the importance of data is the foundation for the
implementation of information security measures. Having regard to this, one of our key
priorities is taking care of information security: both personal information and information
related to business, customers and business partners. By applying high standards of data
protection, we balance strict protection measures and efficiency in our daily operations.
Ericsson Nikola Tesla Group has been continuously and dedicatedly implementing and
carrying out security measures by respecting high protection standards of all data, with the
aim to develop and deliver our products and services, and secure business continuity,
regardless of types of threats.
Management and policies
Managing information security is one of key priorities for the Management Board and the
overall management structure of Ericsson Nikola Tesla Group. Through its information security
policy, the Group reflects the readiness and commitment to dedicate special attention to
information security in regular business. Five areas of information security of which we take
care separately are: security checks, physical security, data security, business cooperation
security, and IT security as its most recognizable part.
Security Management Board and Crisis Management Task Force are the umbrellas at Group
level that deal with safety issues, from planning, implementing and monitoring to correcting.
Special attention is given to security incidents and crisis situations. At Group level, a Security
Manager was appointed who coordinates operations regarding risk management issues and
all areas of security (information, personal, security of persons and property, business
continuity and preserving the company’s basic values). Considering the importance of
information systems in ensuring the basic aspects of information security, there is also an IT
Security Manager.
In order to operationally solve security issues, incident reporting is used for all employees and
business partners. Reporting security incidents is an important part of the incident
management process. Security incidents are then processed in corresponding organizational
units, according to incident type. In 2022, there were no critical security incidents. In addition
to operational activities for eliminating the causes and the consequences of incidents, incident
management process also serves as one of the input data for a continuous improvement of
security systems.
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Ericsson Nikola Tesla Group
Ericsson Nikola Tesla is using an integrated Management System (EGMS), based on business
standards (ISO 9001:2015, 14001:2015 and
45001:2018) which also includes the international
information security standard ISO/IEC 27001:2013 as
the information security management system (ISMS).
Ericsson Nikola Tesla has a valid information security
certificate ever since 2013 and confirms it each year
after regular monitoring performed by an authorized
external auditor. In 2022, in line with good practice, the
auditors were changed, and the following three-year
certification cycle started, while at the same time a
three-year adjustment process to the latest version of
27001:2022 standard also began.
An important and mandatory part of the information
security system is regular education in information
security for all employees and other participants of the
Group’s business processes, as well as the campaign for
raising awareness. In this regard, a step forward in
2022 was the transformation of the existing ETK IT Security Newsletter to ENT Security
Newsletter that encompasses topics regarding information security, corporate security,
product security and protection of privacy.
Risk management
The Group is using Enterprise Risk Management as a framework to manage risks. Considering
the types of risks and areas where they occur, all departments in the company have the
appropriate tools to estimate, process and propose measures to reduce risks.
For the requirements of information security, a range of organizational and technical measures
have been implemented in order to eliminate or neutralize threats. Vital parts of IT equipment
are continuously being monitored and measures of protection, redundancy and increase of
resilience for reliable business continuity are carried out, along with the plans for disaster
recovery.
As both the areas where the biggest threats have been occurring, as well as the forms in which
they have been occurring, have been continuously changing, thus our employees have been
additionally educated and informed.
Managing crises
In addition to the continuously present cyber threats, the coronavirus and COVID-19 illness
have continued to pose a significant threat to the Group’s security in terms of business and
employees’ health in the beginning of 2022 when, as the main treat to business, they were
replaced by the crisis situation in Ukraine, which was especially and directly reflected on the
Group’s security of employees and business in the neighboring Belarus. Crisis Management
Task Force, active ever since February 20, 2020, is still reaching decisions and forwards
information to all the participants of business processes with the aim of maintaining normal
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functioning of the Group’s business.
By actively responding to these challenges, and as part of social responsibility that Ericsson
Nikola Tesla has as a company of a special public interest, our experts and employees
participate in organizing a civil protection system in the community. The system enables a fast
and efficient response to the occurrence of crisis situations also in a wider community.
Improvements in 2022
In 2022, several improvements were made in the field of information security, and we would
like to highlight the following:
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Application of Sales and Trade Compliance protects against risks
in domestic and international business
Ericsson Nikola Tesla Group is one of large Croatian exporters and doing business in various
markets in addition to business opportunities, also brings exposure to various risks. The best
protection against potential risks is to be well informed, to apply legislation of each individual
market and to monitor the current situation in the country concerned.
In order to protect the brand and stakeholders’ interests, as well as to secure responsible
behavior, and especially to protect human rights and ethical business operations in countries
where the Group does business, Ericsson Nikola Tesla Group applies the Sales Compliance
process. The Group’s employees are also aware of the requirement to respect the laws of their
own countries, as well as other countries where the Group does business, and special attention
is given to Trade compliance, i.e., potential sanctions and/or embargo.
Considering the geopolitical events and export markets in which Ericsson Nikola Tesla Group
operates, the complex activities related to sanctions were especially increased. Sanctions
represent international measures of restrictions and are an instrument of diplomatic or
economic nature which strives to change the activities or policies such as violation of
international law or human rights, or policies that to not comply with the rule of law or
democratic principles.
In regard to this, Ericsson Nikola Tesla Group delivers products and services in the market of
Belarus solely to fulfill the remaining obligations from the contracts in the civil
telecommunications sector that were signed before March 2, 2022, in line with the valid
sanction regulations of the Republic of Croatia and the European Union and the necessary
time-limited export licenses issued by the relevant authorities.
Continuous focus on Sales Compliance and Trade Compliance
Sales Compliance process regulates actions in all stages of the sales process, direct or indirect
sales and business connections. Sales Compliance enables quality assessment, prevention, and
neutralization of potential negative impacts in the field of human rights and brand, thus
preventing any kind of harmful, inappropriate, or unauthorized use of our products, solutions
and services by customers, i.e., end users. The assessment is carried out according to the
following criteria: portfolio (are these products, services, or knowledge sensitive), purpose for
the use of products; profile and structure of the customers as well as user’s country. Defining
risks is also carried out regarding the limitation of human rights, corruption, freedom of
expression, the right to privacy, and other parameters based on international standards and
assessments.
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Regulatory framework and sales processes prescribe one more process that additionally
protects against the negative impact on business. This is Trade Compliance, a process which
consists of specific international and national laws and regulations, especially the regulations
of the European Union and the USA, as well as Ericsson’s policies and directives that we should
adhere to. Ericsson Nikola Tesla Group’s employees are familiar with and obliged to comply
with all the rules and regulations that are applicable in their area of work and defined in local
directives and instructions. Employees can address all their questions and ask for support from
experts in charge of the processes in a certain segment of business and their implementation.
Sales compliance risk methodology and activities in 2022
The basic verification criteria for determining compliance with risks and approving business
opportunities in sales are (all the mentioned criteria are taken into consideration):
country classification – considering the global political situation and international
relations, a level of risk for each country is defined as: low, medium, high;
customer classification – customers are classified as: civil customers or government and
defense customers;
technology risk – each product we are selling, i.e., each product that is in our database,
must be classified in relation to technology risk;
purpose of use – Compliance Board will evaluate a business opportunity in regard to
posing a threat to the brand and protection of human rights, including data protection (GDPR),
and decide if it is approved, approved with conditions, or rejected.
Based on the mentioned criteria, a decision is reached on the further course of a certain
business opportunity. The decision can be: business opportunity is approved - with or without
precondition, or business opportunity is rejected. Business opportunities that were approved
with (a certain) precondition, must include technical and/or contract risk mitigation.
In 2022, Ericsson Nikola Tesla Group initiated 16 requests to verify sales compliance of
business opportunities, of which 13 were approved without preconditions and three were
approved with certain preconditions.
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Digital transformation of sourcing
Ericsson Nikola Tesla Group puts a lot of emphasis on transparency and efficiency of sourcing
activities. Therefore, a project for the digital transformation of the sourcing process was
initiated and successfully completed. As part of the project, a sourcing tool was introduced
through which we have secured a transparent application of the sourcing process for all types
of sourcing activities.
Through the digitalization of the sourcing process, we have enabled traceability of sourcing
processes and automation of certain steps in the sourcing process (automatic verification of
compliance for the existing suppliers and automatic data preparation for issuing purchase
orders). Transparency was increased regarding the procurement procedures and reaching
decisions about supplier selection. By introducing a digital tool for sourcing, we have enabled
the users to have a structured overview of all the sourcing activities in which they have
participated, as well as information about the current status of the ongoing sourcing
procedures. Furthermore, a process was implemented for approving sourcing contracts, the
option of digital signing of sourcing contracts, a notification mechanism about the expiration
of sourcing contracts and a new archive of sourcing contracts were implemented.
Digitalization also enables us to collect data based on which we have been carrying out various
analyses with the aim of further improving the sourcing process.
Responsible sourcing
The responsible sourcing program ensures high standards during the sourcing process and in
the supply chain in areas of labor, the environment, human rights protection and ethical
standards, and fight against corruption. This program enables social and professional
involvement, as well as enabling business opportunities and realizing better conditions for
persons with disabilities. Additionally, through the digitalization of sourcing processes, we are
increasing the level of transparency and efficiency of the sourcing process.
Responsible sourcing program implies a continuous risk assessment for suppliers, regular
supplier audits, evaluations, performance comparison and other activities which ensure
compliance with the Code of Conduct and the Code of Business Ethics. The Code of Conduct is
based on the United Nations Global Compact Principles.
Activities in 2022
In 2022, we were faced with great challenges in the field of sourcing as a consequence of
global disruptions related to availability of certain raw materials and materials, the war in
Ukraine, disruptions in transport, and increased costs of material, labor and energy prices.
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Nevertheless, many sourcing activities were carried out for the requirements of our customers’
projects and various projects for internal needs of the entire Ericsson Nikola Tesla Group.
During 2022, more than 3,000 procurement projects were initiated for the needs of Ericsson
Nikola Tesla Group.
Code of Conduct for Business Partners
The Group’s Suppliers are familiarized with the proposals of cooperation with the Group and
accept regular reviews. It is important to point out that the requirements from the Code of
Conduct for Business Partners are an integral part of all Ericsson Nikola Tesla’s General
Purchase Agreements. By signing these agreements, the suppliers fully accept them and shall:
– ensure that their employees and subcontractors are notified of the Code of Conduct and that
they comply with it
– confirm that both the supplier and their subcontractors comply with the Code of Conduct by
providing information to Ericsson Nikola Tesla or its representative upon request and/or
enabling access to its premises
– notify Ericsson Nikola Tesla Group if they detect any violation of the Code of Conduct in their
business.
This Code of Conduct encompasses, when necessary, specific requirements for the suppliers
related to occupational health and safety, as well as environmental protection, which can be
found in the following documents:
– Ericsson Nikola Tesla Group General Supplier Occupational Health and Safety Standards
– Ericsson Nikola Tesla Group Specific Supplier Occupational Health and Safety Standards
– Business Partner Environmental Requirements.
Reporting non-compliance
Employees, suppliers, customers and other partners associated with Ericsson Nikola Tesla can
report suspected infringements of the law or the Code of Conduct to the local executive
manager or in a manner in accordance with the locally established procedure.
Any irregularity can be reported via e-mail at compliance.etk@ericsson.com, or anonymously
by using the Compliance Line at www.ericsson.hr/en/company-governance. The Compliance
Line is available 24/7/365, and the report can be submitted via a user-friendly reporting
system. Compliance Line is operated by a third party, and after the report is submitted, the third
party will deliver it to Ericsson Nikola Tesla Group, which will not have access to the sender’s
IP address. It is possible to submit a report in Croatian, Bosnian, Serbian, Montenegrin, English,
and Russian.
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Checking suppliers’ compliance
In 2022, we have continued using tools to check suppliers (Suppliers Screening Tool (SST) and
Third-Party Management (TPM)) to establish the suppliers’ possible connection and
involvement in corruption affairs, unethical behavior, operations, etc., and in order to consider
the possibility of occurrence of corruptive activities, depending on the type of service that the
supplier delivers, the country of service delivery, payment conditions, etc. The mentioned tools
provide local and global data on business entities.
By digitalizing the sourcing process, we have automated compliance verification of the existing
suppliers, and in this way accelerated the overall verification procedure.
In 2022, for the requirements of sourcing projects, more than 3,400 supplier screenings were
performed. More than 2,400 business entities with which Ericsson Nikola Tesla Group had a
business relation were screened on a weekly basis. In addition, all persons connected to these
legal entities were screened (owners, directors, and members of management boards).
Continuous use of the tools mentioned enables a continuous approach to relevant information
and their interpretation, evaluation and understanding, which is necessary for us in order to
reach business decisions and optimize potential risks regarding the choice of suppliers and
business partners.
Main risks include:
– amended or new regulatory requirements that negatively impact the availability and the
prices of materials
– increased prices of materials/raw materials, and even services, and shortage of certain raw
materials
– issues in transport which result in significantly longer times of delivery, delays and, in the
end, increased costs
- significant increase of energy prices
- geopolitical uncertainties
- inflation
- increased cost of labor.
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Zero tolerance for corruption
Strengthening a zero-tolerance culture
Ericsson Nikola Tesla Group has zero tolerance for bribery and corruption. Corruption entails
serious legal and reputational risks; it hinders business growth; it harms relationships with
employees, customers, shareholders, suppliers and the society as a whole; and it represents a
significant obstacle to the economic and social development in countries across the world.
We have embedded zero tolerance for corruption as the leading principle on the highest levels
of the company. Moreover, we have been implementing it throughout all organizational levels,
along with a comprehensive set of rules and processes that all employees must adhere to.
Our approach
We continue to strengthen the rules and processes through which we set our own high
expectations and ensure the ability to meet strict anti-corruption rules on all our markets.
Ericsson Nikola Tesla Group’s Code of Business Ethics and Ericsson Nikola Tesla Group’s Code
of Conduct for Business Partners are the two main policies that describe our commitment to
anti-corruption. We have been continuously encouraging our approach to anti-corruption
business and this is an important topic at Executive Management and employee meetings.
During 2022, we have continued to carry out the activities of eliminating or mitigating risks
that had been observed in the previous year, in line with the ABC analysis (Anti-Bribery &
Corruption Standards and Framework).
Supervisory Board and Audit Committee have been regularly informed about the
implementation and the achievements of ABC RA program. All the Group’s employees are
regularly educated and pass the anti-corruption and compliance knowledge test; after
completing education courses and knowledge tests, new employees certify with their signature
that they agree to follow the company’s Anti-corruption Policy. Anti-corruption is one of the
important components of internal audits.
Ericsson Nikola Tesla Group does business in a responsible and legal way and requires its
subcontractors and suppliers to do the same. We reduce corruption risks by expressly stating
our commitment to anti-corruption to suppliers and other business partners through our Code
of Conduct for Business Partners and anti-corruption e-learning course.
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Suppliers and business partners
With our suppliers and business partners, we build long-term relationships which imply dialog,
knowledge sharing and application of modern-day working models. Suppliers and their
subcontractors are required to comply with the high-quality standards and adhere to the Code
of Conduct for Business Partners and the Code of Business Ethics. In addition to continuously
using tools to perform due diligence on suppliers and business partners for the purpose of anti-
corruption, the company’s evaluators also perform an external evaluation of the quality of key
domestic suppliers by using a survey prepared in line with the standards.
We screen our suppliers and business partners by using the Suppliers Screening Tool (SST) to
check their potential connection and involvement in corruption affairs or any kind of unethical
behavior, operations, etc. By continuously monitoring relevant databases and through weekly
reports on the obtained information about suppliers according to the set negative risks
screening, the tool shows a possible connection of an individual business entity, or a person
connected to a business entity with some sort of risk. The risk itself may be of financial nature;
it may relate to political exposure of the Management Board members, directors and owners
connected to a business entity; and it may show whether the entity is listed on any sanction or
a similar negative list.
Through the digitalization program, activities in the systems for contracting and checking
business partners were automated, thus enabling greater efficiency and transparency for the
requirements of further activities related to business partners.
Our anti-corruption tools
– Code of Business Ethics
– Code of Conduct for Business Partners
– app which enables anonymous reporting of non-compliance
– non-anonymous reporting of non-compliance to a Person of Confidence in line with the
Whistleblower Act
– Anti-corruption program
– tools for screening suppliers and partners
– education
– raising awareness through messages to all employees.
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Key elements of the Ethics and Compliance program
– leadership and culture
– policies and processes
–
organization of compliance
– risk assessment
– training and communication
– awards and sanctions
– third-party management
– allegations and investigations
– monitoring process implementation
– due diligence in mergers and acquisitions.
Key data for 2022
– all active employees have passed the e-learning anti-corruption course
– we have continued with organizing anti-corruption courses; compliance and anti-corruption
workshops were held for the Management Board, Executive Management, other managers
and employees in all the units that might be exposed to corruption risks
– anti-corruption was brought to attention at the most important meetings of the Group’s
Executive Management
– new members joined the Compliance and Investigation Team
– further improvement measures have been carried out following extensive corruption risks
estimations (ABC RA) in the overall Group, and then focusing on the area of efficiency of
checking the business partners’ integrity
– a procedure was carried out to check the integrity of key positions
– Conflict of Interest Policy was publicly announced
– a survey was carried out among all employees, and excellent results were obtained to
questions in the field of Group’s ethics, compliance, and management
– new Bylaws on internal reporting of irregularities were passed, Persons of Confidence and
their Deputies were elected for three companies of ENT Group (Ericsson Nikola Tesla d.d.,
Ericsson Nikola Tesla Servisi d.o.o. and Libratel d.o.o.). In this way, the possibilities and the
channels to report irregularities were significantly improved, with additional protection of the
person reporting, in line with the Whistleblower Act.
Main risks:
- failure of employees or a third party to comply with anti-corruption laws and regulations,
rules of fair market competition, code of business ethics and related policies and directives.
- potential conflicts of interest that include our employees and third parties.
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Employee Occupational Health and Safety
The company has set high standards of employee occupational health and safety. Accordingly,
it carries out the policy and many activities to achieve quality care for our employees and other
people we cooperate with, and the existing practices are continuously improved.
Managing the Occupational Health and Safety System
Ericsson Nikola Tesla d.d., as the parent company, is responsible to determine the strategy and
processes, recognize risks and opportunities, and launch initiatives focused on occupational
health and safety which are then applied in all other companies of the Ericsson Nikola Tesla
Group.
Occupational Health and Safety governance system is divided into several levels in the
company.
Management Board, together with its appointed OHS authorized persons, employees’
commissioners voted by employees and engaged OHS experts take preventive actions in order
to eliminate the causes of threats and reduce risks. The purpose of preventive actions is to
prevent occupational injuries and other incidents by applying all legislative requirements and
requirements under relevant international standards.
During sessions of OHS committees that were established in the companies of the ENT Group
and which also include employees’ representatives, as well as during Executive Management
meetings and meetings with the Union, the OHS system status is regularly presented and
analyzed, and actions for its improvement are proposed.
The consultation with employees is ensured by means of communication through the
employees’ commissioner and other ways of communicating. Employees are included and
encouraged to actively participate in activities of developing and maintaining the occupational
health and safety system.
Ericsson Nikola Tesla Group has the ISO 45001 certificate. External audits of ENT Group
carried out by the certification body SGS Adriatica d.o.o., were carried out at the end of
November 2022. External audit for Ericsson Nikola Tesla Servisi d.o.o. was carried out by the
certification body TÜV Austria in March 2022. The auditors from both audits concluded that
the OHS system is fully aligned with the requirements of ISO 45001.
At least once a year, and if necessary, more often, ENT Group carries out a compliance check
in line with legal requirements in the OHS field. Compliance of the OHS system with all the
requirements is carried out by means of many internal audits in the entire ENT Group.
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Managing OHS risks
Risk assessment is the most important process in the field of OHS. This contains a record of the
current condition, analysis and estimation of recognized risks, as well as the plan of measures
to reduce the level of threat and the probability of unwanted scenarios to happen. Risk
assessment document is aligned at least once a year with the changes in legislation,
environment and processes, demands of all interested parties as well as learned practices that
arose from researching the incidents that occurred. Based on the recognized risks and
opportunities, KPIs are set and monitored, and measures of improvement of the overall OHS
system are implemented at Group level.
In line with circumstances and relevant legislation, members of the Group update their risk
assessment and inform their employees and all other stakeholders thereof.
The majority of our colleagues at sites in Zagreb, Split, Osijek and Rijeka, as well as colleagues
working at other locations in Croatia and abroad, perform their work tasks in the office.
Therefore, it is important that work premises are safe and ergonomically designed and adapted
to every employee. Regular testing of workplace parameters and safety of electric installations
in offices in all the Group’s locations, equipping offices with new standing desks, carrying out
fire protection measures, as well as regular evacuation and rescue exercises are just some of
the measures that impact the quality of our employees’ workspace.
Eyestrain, static efforts associated with prolonged sitting, as well as risks related to stress and
mental health of employees, have been recognized by the company, and an entire range of
activities and measures was created, such as regular medical checkups and the PrevENTion
program, in order to reduce the consequences of these risks to a minimum. Professional
lectures about mental and physical health and workplace-related risks were also organized.
Exercises and activities that enable us to eliminate the consequences of long hours of sitting in
the workplace were shown and promoted. Other aspects of benefits for employees were also
recognized, such as financial well-being, and encouraging colleagues to socialize outside of
business activities.
Due to the continuation of the COVID-19 pandemic in the beginning of 2022, most employees
continued to work from home. The results of the surveys showed that most employees who
worked remotely did not experience reduced productivity, however, isolation and remote
working have left their mark, primarily in harmonizing and separating private and business
responsibilities. Employees could borrow equipment necessary for work from the company in
order to have all the necessary conditions to work at home (chair, monitor, etc.) The company
has also introduced a hybrid model of work for the majority of employees, which happened as
a result of monitoring trends and risks that occurred, as well as harmonizing with the changes
in legal regulations in the field of occupational health and safety.
In addition to working at the office, many employees work on sites. In addition to climbers and
according to statistics, approximately 40% of tasks performed by Ericsson Nikola Tesla Servisi
d.o.o. are considered tasks with special working conditions, which means this is a company of
medium risk, and thus requires special engagement of our OHS experts. Challenging working
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conditions, such as working at height, working with electricity, and unfavorable weather
conditions, require our continuous preparation, dedication and focus on executing work tasks
in line with OHS rules in order to avoid risks and danger of injuries. We achieve this through
regular medical checkups, quality protective equipment, continuous employee education and
fieldwork
supervision.
In addition to having supervised our employees, our OHS experts’ audit teams performed
supplier audits, paying special attention to compliance with OHS rules on high-risk projects.
The situation on site has shown that in most cases, suppliers perform their work in line with the
safety rules.
Education of employees and external associates
Last year, we hired a significant number of new employees. All new employees passed an
introductory seminar and an OHS test, thus gaining theoretical knowledge and practical
experience in training for safety at work. All students and hired agency workers who cooperate
with us on various projects also undergo trainings for safety at work. Expert trainings of
employees for the tasks with special working conditions, as well as for providing first aid and
evacuation and rescue, are held when necessary and in line with the job requirements.
With the aim of preserving health, working abilities and optimal efficiency, employees receive
educational materials on various topics regarding OHS areas, such as working in unfavorable
microclimate conditions, driving safely, reporting safety incidents and news regarding OHS
rules.
In addition to taking care of our employees, we also take additional care of external
contractors on various projects, who took over the obligation to comply not only with OHS legal
regulations, but also with Ericsson Nikola Tesla Group’s standards. We particularly brought to
our external contractors’ attention that for our company, adhering to OHS regulations
represents an extremely important segment of doing business, and that the failure to do so is
unacceptable. During the workshops for contractors, we try to provide an individual approach
and care for each individual external contractor, in a way that we examine the situations they
come across in their work, and with our advice help them to organize an OHS system within
their organizations in the best way possible. We all have the same goal - to go back home to
our loved ones each day after performing our tasks at work.
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Reporting incidents in ENT Group
It is extremely important to undertake every action in order to avoid incidents and reduce their
severity, should they occur. However, when incidents and accidents do happen, they have to
be reported and investigated in order to identify main causes and take measures to prevent
their recurrence.
Employees are encouraged to report all OHS-related incidents, whether it concerns work-
related injuries, illness, accidents or dangerous situations, in line with the process and available
templates that are applicable in the entire Group. The rules and instructions apply to all
employees, whether they work in the office, on site, or remotely.
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People are our strength
Employee innovativeness, knowledge, skills, dedication and integrity are among the main
foundations for the Group’s business success and growth. Our employee professionalism and
expertise, as well as high quality solutions and services they create and deliver have been
recognized locally, regionally and globally. The Group’s employees have been continuously
developing and creating new products, solutions and services of high added value, important
for the realization of digital transformation processes of the industry and the society as a
whole.
Synergy of knowledge and values
Most employees of Ericsson Nikola Tesla Group are ICT experts and other experts from
associated fields who use their knowledge and skills to contribute in the build, modernization
and optimization of critical infrastructure to achieve the goals of digital green transition of the
economy and society.
The parent company Ericsson Nikola Tesla employs approximately 1,800 software developers,
which is the largest concentration of this kind of experts in Croatia. Due to the importance that
the ICT industry has in shaping the future of all of us and the related responsibility towards a
wider community, we hire candidates who, along with the expertise in the required field also
embody our basic values - respect, professionalism, perseverance and integrity. Our way of
mutual interaction, doing business as well as cooperation with customers and partners are
based on the synergy of knowledge and values.
We have committed to the highest level of integrity, ethics and transparency in managing
business.
We have defined the necessary knowledge, skills and characteristics that candidates must
possess, as well as areas of excellence on which we base our competitive advantage.
Considering that we wish to attract the best employees, one of our important strategic goals is
for us to be an employer of choice in an extremely competitive market of ICT experts.
Therefore, in addition to special attention we dedicate to attracting and retaining experts, we
are also focused on planning the development of their potential.
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Focus on reaching full potential
Our model of people management is focused on reaching the full potential of individuals and
teams. The foundations of this model are:
-
a clearly defined role of every individual and its importance for the company’s success
as well as purposeful work assignments
-
motivation to achieve excellent results and for further learning, development and
growth
-
continuous feedback about the person’s impact on the team’s and the Group’s success
-
joint contribution of all individuals in achieving success
-
diversity and inclusion as an encouragement for innovations
-
encouraging and rewarding innovativeness
-
mentoring
-
creating an impact on results through effort, work, and commitment
-
possibility of reaching decisions individually
-
strong leadership that provides clear guidance and support in target realization
-
fairness in awarding.
An environment for growth and development of top experts
A dynamic, fast growing ICT industry implies experts who agilely apply obtained knowledge,
as well as continuously acquire new knowledge and find a way to apply them in the realization
of complex digital transformation projects of industries and society. In order to additionally
motivate employees to achieve targets, Ericsson Nikola Tesla Group has been continuously
working on creating and improving the work environment, namely by:
•
providing the possibility of lifelong learning and specialization, as well as career
development
•
ensuring attractive jobs and giving clear roles to each employee, in order to achieve
common goals
•
providing the possibility to work in global teams
•
flexible working hours
•
encouraging innovativeness in all work segments
•
ensuring equal conditions of work and development to all employees
•
recognizing and visualizing individuals and teams who achieve the best results
•
a reward system based on the principle of equally awarding equal work results
•
a modern equipped workplace with all the tools necessary for work
•
a motivating company culture
•
taking care of the employees’ physical and mental health, and providing a high level of
occupational health care
•
a high level of occupational safety
•
the possibility of saving in Ericsson Nikola Tesla’s Closed Voluntary Pension Fund
•
numerous benefits for working parents
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•
the possibility of recreation and socializing in sport and culture associations
•
using the benefits of Bonus Club.
The Group retains a very small percentage of employees leaving compared to the labor market
that is extremely demanding. In order to retain experts in the company, we regularly carry out
analyses of our employees’ salary competitiveness, secure various benefits, enable
competence development in various career directions, while at the same time maintaining a
healthy work-life balance. We use the feedback we receive from employees to further improve
the way of working, retain experts and attract new talents.
Mentoring - individual support for new employees
A well developed and well-established process of introducing new employees in the work
processes is important for the entire Group, especially due to intensive employment of a large
number of young experts without work experience over the past years. Young experts have
quality mentors who provide them with expert assistance in their daily work, follow personal
and professional development of new employees, and participate in the process of their career
planning. We nurture quality mentor relations in the Group, characterized by quality
connections, trust and focus on connecting young experts with the company, development of
knowledge and competencies. A well-thought process enables the mentor to perform a quality
assessment of the trainee during the trainee period, and helps the trainees in their progress,
development, acquiring necessary knowledge and skills, as well as receiving additional
recommendations. For employees who have previous experience and knowledge, mentoring
secures the best possible integration and connection with the company’s culture, teams and
ways of working. In 2022, Ericsson Nikola Tesla Group hired 354 new employees, who were
mentored by many experts/mentors, and special attention was given to trainees with the aim
to speed up their inclusion into business and processes.
An encouraging awarding system
The awarding system in Ericsson Nikola Tesla implies a unique system of salaries and benefits,
by which the employees are encouraged to use and develop their knowledge and capabilities,
expand their area of responsibilities and authority, and are awarded in line with the achieved
results and realized new values in their work. The system is based on the principle of equal
award for equal results, the correlation between the goals set and the results realized, as well
as the possibility to differentiate employees by considering their work accomplishments.
The system encompasses the following:
- contracted salary
- variable pay compensation
- addition to the salary
- benefits.
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Each of the listed elements of the awarding system is regulated by the founding documents,
the Collective Agreement, Salary Rulebook, as well as the corresponding policies.
In line with the general goals of the salary system, the employees are additionally awarded for
the results, the volume and importance of which exceeds the expectations of their
organizational unit or the company.
Variable pay compensation:
- Company award / all employee award, paid in line with the realization of the previously
planned business targets and conditions defined at the beginning of the year
- Variable pay compensation for target realization (Short-term variable pay/Sales incentive
plan - STV/SIP), paid out in line with the realization of previously planned business targets
and conditions that were defined at the beginning of the year, and in line with the rules defined
by the Salary Rulebook and the Agreement about Salary Policy for the concrete year.
Individual awards:
- awards for exceeding expectations
- award based on an internal competition for the achievement of previously defined and
important goals for the organizational unit / company (awards per competition)
- awards for innovations for innovative solutions that were developed while working or work-
related solutions are awarded in line with the Rulebook on awarding innovation solutions.
Additions to salary:
compensation for a hot meal
paying expenses to commuting to/from work
single addition to the salary for annual leave (vacation allowance).
Benefits
Care for employees that is visible in concrete activities that contribute to the well-being and
quality of work and life is one of our main priorities and can be seen in numerous benefits that
employees have. Some of the benefits are: employer’s payment and the possibility to have
more favorable savings conditions in the Closed Voluntary Pension Fund of Ericsson Nikola
Tesla, organized health checkups, shares for employees, modern IT equipment, continuous
education, favorable loan terms, using the company’s restaurant on campus, the option to join
cultural and sport sections, using the benefits of the Bonus Club.
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Benefits for parents
Work-life balance is an important factor in preserving physical and mental health and is
especially challenging for young parents. With more than 40% of our Group’s employees
younger than 35 and knowing this is a period in life when most people decide to start their
family, many measures have been implemented to achieve balance between professional and
personal life. New parents in our company are entitled to aid for each newborn baby
amounting to EUR 1,327.24. The parents of children with special needs have the right to
annual aid amounting to EUR 2,655 gross and two additional days of annual leave. In addition
to flexible working hours, days off for prenatal checkups, breastfeeding pauses, equal rights
for fathers to go on paternity leave and other benefits, we also allow parents to bring children
to work whenever the need for that occurs. Our employees’ children up to the age of 15 are
entitled to receive a gift in the value of EUR 172.73 per year, and their parents have the right
to have two to six additional days of annual leave, depending on the age and the number of
children, regardless of the fact which parent claims the child as a dependent. The children of
our employees who passed away are entitled to receive a scholarship during their regular
education. Since 2021, we have been helping employees to cover costs of regular preschool
care, amounting to EUR 40 per child.
Ericsson Nikola Tesla’s Closed Voluntary Pension Fund
At the beginning of 2005, in cooperation with the Raiffeisen pension fund, Ericsson Nikola
Tesla founded the Closed Voluntary Pension Fund of Ericsson Nikola Tesla. In that way, as the
sponsor of the Fund, the Company wanted to offer its employees, and primarily the younger
ones, a chance to realize maximum benefit from long-term saving in a closed pension fund.
As the sponsor of the Closed Voluntary Pension Fund (ETK ZDMF), in 2022 Ericsson Nikola
Tesla continued to further motivate employees to save in the Fund by paying an annual deposit
of HRK 1,000 to each employee who is a member of the Fund.
In 2022, approximately 200 employees joined the Fund, and at the end of 2022, the Fund had
2,200 members. Out of the total number of members, 1,850 are currently working in ETK, which
accounts for 68% of the total number of ETK employees. At the end of 2022, the Fund’s net
assets amounted to HRK 49.3 million. Since the Fund was established, the Fund’s average
annual return has been 6.09%, and in 2022, it was -6.03% due to the impact of the global
uncertain conditions in the markets.
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Monitoring employee engagement and satisfaction
We have been continuously monitoring employee engagement and satisfaction, whereas the
Voice survey represents an important tool for measuring the organization climate and gaining
an insight into the employees’ opinions on various areas of operations. We carry out the Voice
survey annually, thus contributing to holding a dialog with employees, and gather information
about the satisfaction with various changes we have been introducing. Thus we additionally
strengthen feedback culture and change management. Employees and their managers
participate in proposing changes and improvements in all segments of their work and doing
business. In 2022, at Ericsson Nikola Tesla d.d. level, the survey on employee engagement was
carried out with response rate of more than 85 percent of employees. A detailed analysis of the
collected feedback shows us the areas for improvement on all levels and all segments of the
Group, on which we base relevant changes and adjustments.
Cooperation with the Union
We have been continuously working on harmonization of our organization with the market
demands and needs, with the purpose of ensuring and strengthening competitiveness. In doing
so, we exchange information and consult with the Union on all important topics pursuant to
the law and the Collective Agreement.
PrevENTion – we care about physical and mental health of employees
We have transformed strategic focus on care about health, safety and well-being of employees
and other stakeholders into internal policies and long-term good practice that has been carried
out through defined processes and is applied in everyday work. This good practice is
complimented by special programs, such as the PrevENTion program. This is a comprehensive
program with a range of content with the aim of strengthening physical and mental health that
is available to all employees. Within the PrevENTion program, during 2022 employees
participated in various activities, such as professional lectures on physical health, mental well-
being, financial well-being, guided trainings and yoga, pub quizzes, etc.
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We respect diversity and promote inclusion
Respecting diversity and inclusion of all employees, and all other stakeholders in our business
are the main components of the company’s culture and represent the adopted values of
Ericsson Nikola Tesla Group.
We believe that diversities enrich us and broaden our perspective, due to which we can have a
corresponding response to the demands of our customer and markets and create innovative
ICT solutions. For us, diversity is wealth that contributes to our competitive advantage.
We act according to the principle of equal opportunities for every individual, having zero
tolerance for discrimination on the grounds of age, gender, race, national or ethnic origin,
language, religion, political views, sexual orientation, physical abilities, etc.
Appreciating mutual differences and accepting values that every individual brings to the work
environment can be seen in all the Group’s processes and business activities. In our teams,
people of various characteristics and talents compliment each other gathered around joint
tasks and create and implement comprehensive solutions. Team members have the
opportunity to give their unique contribution to the Group’s success, by which we create
prerequisites for long-term sustainable development of our business.
We implement our Diversity and Inclusion Policy in all segments of our business and other
activities, and this policy is incorporated in all other company policies, such as employment
policy, managing human resources, etc. Implementing diversity and inclusion in all segments
of business is encouraged and supervised by the organization’s highest management bodies.
We have a company culture in which managers act so as to set an example and have an active
role in putting together teams and creating a stimulating working environment where every
individual feels included, valued and is ready to give their best. Such company culture is
implemented in the entire organization, and it includes each and every one of our employees
who show respect for the colleagues, customers, partners and all other people they interact
with in their everyday work and activities.
Zero tolerance towards discrimination is applied in the entire Group, which means that no
individual in the organization shall be discriminated based on race, color, sex, sexual
orientation, gender, marital or parental status, pregnancy, religion, political opinion,
nationality, ethnicity, social origin, social status, disability, age, union membership or any other
characteristic protected by law.
Promoting inclusion in the society
Ericsson Nikola Tesla promotes the need to respect diversity and inclusion in its daily business
as well as by participating in relevant social initiatives. Among other things, the company is
one of the first signatories of the Croatian Diversity Charter, and the company’s president is
also its ambassador. Furthermore, considering the discrepancy in the representation between
men and women in STEM, which is becoming increasingly important for a competitive
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sustainable development of the economy, in cooperation with the educational community we
have been undertaking many activities to motivate girls and young women to choose STEM
professions.
We operate in an industry that connects people regardless of their differences, and enables
them to exchange opinions, ideas, knowledge, and to be active stakeholders in a society which
is going through a digital transformation.
ICT solutions that we create, mainly the ones in the domain of public services such as
healthcare, land registry and cadaster or public administration, as well as planning, building,
maintenance and modernization of the modern communication infrastructure enable a greater
involvement from the citizens by enabling them to access services from their homes.
We encourage growth and development of our employees and
the entire ecosystem
Investment in competence in implementing the leading technologies and the highest level of
our employees’ professional, business and soft skills is one of the main foundations for the
realization of Ericsson Nikola Tesla Group’s long-term strategy. Through its actions,
cooperation with the universities and the development of its experts, the Group contributes to
the competitive development of the Croatian economy in line with the EU’s Digital Decade
targets.
Various opportunities for growth and development
We have been continuously investing in the development of knowledge, skills and
competences of our employees in order to retain and additionally strengthen our position as
the leading Croatian exporter of knowledge. We advocate and give our contribution to lifelong
learning by offering our employees various opportunities for growth and development. In
addition to formal forms of learning, such as courses that take place in classrooms, hybrid or
online, we also support informal opportunities for learning by offering employees to select the
content, way and pace of adopting new knowledge and skills according to their own
preferences and possibilities. In doing so, we combine our own resources, global corporation
services and cooperation with partner educational institutions from public and private sector.
The parent company also has a separate unit for education - Ericsson Nikola Tesla’s Education
Center which operates as a flexible organization focused on providing a wide range of
educational services for the needs of employees, customers, and partners.
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We educate future leading experts
Since the largest concentration of experts in the field of software development in Croatia is in
our company (almost 1,800 of them), we have an excellent position for accepting new future
experts and their career development.
Keeping up with and predicting trends in an extremely dynamic development of industry in
which we operate, more than two decades ago we have identified the need for a continuous
close cooperation with the academia. We have therefore in 2001, in cooperation with the
Faculty of Electrical Engineering and Computing of the University of Zagreb, initiated Ericsson
Nikola Tesla Summer Camp, attended by as close to 900 students since. With the support from
mentors from the company and institutions that Ericsson Nikola Tesla cooperates with, the
participants of this summer camp have successfully realized hundreds of projects. We have
been continuously developing the long-term tradition of cooperating with the universities in
Croatia and abroad by cooperating on projects and in academic classes. Our goal is to
contribute to the development of top ICT experts by offering them, among other things, the
opportunities to test their knowledge in practice by applying the leading technologies for
creating digital green solutions that contribute to the development of UN Sustainable
Development Goals.
We also pay special attention to the development of managers, who attend the program called
newLDP. This is a comprehensive one-year program of developing leaders according to the
Ericsson leadership framework management competence model. This program also
encompasses various teaching methods (modular courses, coaching and mentoring, e-
learning, exchange of knowledge and experience, etc.), with a special focus on being mentored
by senior managers and the application of acquired knowledge and skills in the work
environment.
We share knowledge with the ecosystem stakeholders
In addition to a developed mentoring system which is an integral part of the company’s new
employee onboarding program, where the key role is given to the mentor and line manager,
the company’s business unit teams play a key role in strengthening our leadership position by
continuously transferring knowledge to new colleagues and teams from other units.
As part of the onboarding process, new unit members have theoretical and practical content
available that helps them to be involved as fast as possible in everyday activities with the
support of colleagues. The content and the process itself have been continuously optimized in
line with the requirements of employees and business.
The company’s teams from various domains also organize internal programs of education in
cooperation with the Education Center, thus directly contributing to the synergy between
teams at company and Group level.
The excellence of our experts has been recognized at a global level, and by using their
knowledge they have been contributing to global projects of development and implementation
of modern technology solutions. Ericsson Nikola Tesla’s experts also have a long-term
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experience in creating innovative ICT solutions for the digital society in the segments of
eHealth, eBusiness, IoT solutions, solutions for transport management, and, most recently,
eEnvironment. Due to this, they are regular guests at relevant conferences for professionals
and transfer valuable knowledge and experience to other stakeholders in the ecosystem.
Individual approach to employee development
Every employee and their line manager agree on the plan for developing business and
technical knowledge as well as social skills through a process which is aligned with the
business strategy directives and set goals that are a part of annual planning (Individual
Performance Management (IPM)). Development goals are also clearly defined, and their
realization is continuously being monitored throughout the entire year, in addition to regular
managers’ feedback.
34,172 hours of education in total
9,76 hours of education on average per employee
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Facts and figures
*as at December 31, 2022
Number of employees at Ericsson Nikola Tesla Group
Number of new hires in Ericsson Nikola Tesla Group
Employee turnover at Ericsson Nikola Tesla Group
Employee turnover at Ericsson Nikola Tesla d.d.
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Ericsson Nikola Tesla Group employees – distribution by sex and age
Qualification structure of Ericsson Nikola Tesla Group*
Line managers and Program and Project managers of Ericsson Nikola Tesla Group
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Occupational injuries and worktime lost
Ericsson Nikola Tesla d.d.
2021
2022
Zagreb
Split
Osijek
Zagreb
Split
Osijek
Rijeka
M
F
M
F
M
F
M
F
M
F
M
F
M
F
Total number of
1
0
0
0
0
0
1
0
0
0
0
0
0
0
injuries
Work-related
0
0
0
0
0
0
0
0
0
0
0
0
0
0
injuries
Injuries during
commuting
1
0
0
0
0
0
1
0
0
0
0
0
0
0
to/from work
Major injuries
0
0
0
0
0
0
1
0
0
0
0
0
0
0
Minor injuries
1
0
0
0
0
0
0
0
0
0
0
0
0
0
Total worktime
0
0
0
0
0
0
189
0
0
0
0
0
0
0
lost
note: M – male; F– female
Ericsson Nikola Tesla Servisi d.o.o.
2021 2022
Total for all locations in the Republic of Croatia
M
F
M
F
Total number of injuries
4
1
8
0
Work-related injuries
4
1
8
0
Injuries during commuting to/from work
0
0
0
0
Major injuries
1
1
4
0
Minor injuries
3
0
4
0
Total worktime lost
1184
184
4120
0
note: M – male; F– female
Explanation of injuries for Ericsson Nikola Tesla Servisi d.o.o.:
2021: 5 work-related injuries (4 on site and 1 at the office)
2022: 8 work-related injuries on site (7 while working on site and 1 injury in traffic during
work)
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The ratio between the average total annual remuneration for an individual with the highest
salary in the company and the total annual remuneration of all employees (without the
individual with the highest salary)*
Amount
HRK
CEO / average everyone else
10
Total annual remuneration (gross 1)** in 2022 CEO / average everyone else
12
* contracted salaries as at 31 December 2022
** including employees who have been employed for the whole year 2022. Includes all
payments within a year: salary, overtime, standby, transport, hot-meal, kindergarten fee, a gift
for the child, Christmas voucher, Closed Voluntary Pension Fund payments, vacation
allowance, advance payment of annual award for all employees (All Employees Award - AEA)
12/2022, variable amount of salary for meeting the set targets (Short-term variable pay –
STV) paid in 3/2022, onetime payment in 12/2022
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ENVIRONMENTAL
RESPONSABILITY
ESG
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Environmental responsibility
Climate change is one of the most important global challenges. Ericsson Nikola Tesla Group
continues being focused on rational energy consumption and having a positive impact of
technology on the environment, as well as on the operations in the entire value chain.
Environmental Management Policy is an integral part of our Quality, Environmental and
Occupational Health and Safety Policy, which is an umbrella document of our integrated
system described in the Handbook of the integrated management system of ENT Group. The
processes and activities within the environmental management system, together with
procedures and other documents of the system define a clearly established scope and
sequence of activities, the corresponding responsibilities, authorities and verification methods.
The Group will continue to solve growing demands and expectations of stakeholders related
to the company, particularly regarding transparency around the impact of business operations
related to climate. In line with the mentioned, this report brings an overview of the Group’s
activities in the field of sustainability and a presentation and evaluation of work in line with
the EU Taxonomy environmental goals where we have recognized our impact. Since ICT
industry is not among the sectors with a high risk for the environment, this impact is dominantly
present in the area of contribution to climate change mitigation, with the application of the do
no significant harm criteria and according to minimum social safeguards and human rights and
labor rights.
The company’s work on ecological sustainability is divided in the following areas:
–
reduction of emissions from the supply chain and own activities;
–
improvement of energy efficiency of products and services;
–
implementation of circular economy approach when designing products and using
materials;
–
how can the Group’s products and services enable the society and other industries to
reduce emissions.
Reduction of emissions from supply chain and own activities
The company’s long-term goal to reduce emissions by 50% until 2030 encompasses emissions
from the fleet vehicles, the use of business premises, business trips and transport. The Group’s
goal encompasses emissions from Scope1 and 2, as well as Scope 3, business trips and
employee transport (including remote work). By using renewable energy sources, carrying out
the energy renewal of office premises and implementing remote work, the Group has already
now achieved its target; however, it does not stop there, but wants to get as close as possible
to zero emissions by further optimization.
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Improving energy efficiency of products and services, with the circular
economy principle
The Group’s approach in regard to environmental sustainability includes the reduction of the
negative impact on the environment in the entire value chain which encompasses everything
through circular economy, from design, production and use phase to re-use, return of products
and processes at the end of the life cycle. Additionally, solutions and products based on using
5G technology, and in conditions of increased data traffic, achieve significant savings in energy
consumption and the volume of the used equipment (proven by breaking the energy curve).
The Group’s products and services that enable the society and other
industries to reduce emissions
Solutions that Ericsson Nikola Tesla provides in the area of environmental protection and
sustainable economic growth enable various industries to monitor, manage and reduce their
own environmental footprint and potential negative impacts that the industry can have on the
local community, natural ecosystems and biodiversity in a systematic way. They can also be
used by local communities and others.
In 2022, Ericsson Nikola Tesla focused its business and portfolio in the field of environmental
protection in three key directions:
a)
Developing solutions for monitoring the quality of drinking water in public water
supply systems and small private water supplies
As part of the IRI2 WaterQ project, we have entered into the final implementation stage in
which our solution is used in real conditions. The platform for monitoring the quality of drinking
water has been implemented in three public water supplies (Krk, Sinj and Ploče) and three
small private water supplies (Kalinje, Žumberak and Radočaj Brodski). From WaterQ project,
ENT will create an IT solution/product WaterQCity that will allow users to monitor the quality
of drinking water in real time, and the company plans to actively promote this product on the
market.
Monitoring the quality of drinking water is especially important in the case of small-scale water
supplies that are not under continuous monitoring of the county institutes for public health,
and where the research showed that almost 30% of water samples are inadequate for drinking.
By implementing Ericsson Nikola Tesla’s system, both parties will benefit; the local population
will receive an overview of certain drinking water parameters in real time (which has not been
the case so far), and the county institutes will be able to follow the trend of the selected
indicators which enable them a simpler planning of irregular controls and an insight into the
quality of drinking water. This solution will significantly impact the quality of life of inhabitants
in rural communities by bringing them closer to the quality of utilities available to inhabitants
of urban areas.
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b)
Smart City solutions for a greater quality of city life
For the needs of the town Samobor, Ericsson Nikola Tesla has implemented a noise pollution
monitoring system at the Bogumil Toni Elementary School. The monitoring was realized by
using the eENVCity software platform. The aim of implementing this system is to ensure a
quality environment for the pupils of elementary school and to protect the children from
excessive noise. In addition, the system also aims to enable a multimodal use of the school’s
playground in a way that will not be detrimental to the nearby houses and population.
The mentioned ENT eENVCity platform for monitoring the environment in smart cities enables
the monitoring of any environmental parameter, regardless of the sensor type, management
of collected data and access to data, and report drafting.
With the implementation of this system on a wider market, the green transition of cities
towards sustainable development will be achieved and the citizens’ quality of life will increase.
With a focus on predictive analytics and advanced technologies, it enables the users to gain an
insight into the environmental data that they haven’t had so far, and data correlation with
other related indicators at local or regional level (for example, the impact of industry, transport
or construction works on the quality of living in a city).
c)
Industry footprint in the environment - ESG
Changing the rules and paying more attention to the companies’ non-financial reporting with
the aim to minimize negative impacts on the environment and the society have proven to be a
strong market catalyst that demands customized IT solutions.
Complex demands are greatly simplified by ENT’s eENVIndustry platform for monitoring,
managing and reporting related to the industry’s impact on the environment and the society.
In addition to the fact that this software platform enables tracking environmental parameters
in real time and structuring data in line with GRI/ESRS regulation, Ericsson Nikola Tesla’s
platform also enables to cascade reporting goals, as well as central collection and
management of these data for all locations where the industry activity takes place. It enables
environmental protection managers to perform their activities in a structured way, and to have
a firm control over their environmental footprint.
Bearing in mind that production plants and industry plants in general are under great pressure
and in the public eye regarding their footprint, and some are fully or partially in protected areas,
the companies must make an additional effort in managing their climate footprint. Owing to
the eEvironment solution, Ericsson Nikola Tesla has positioned itself as a partner in
implementing a better management of business processes related to ecosystem preservation
and creation, and implementation of operating plans of intervention measures in case of
extraordinary and sudden pollution.
Moreover, in line with a greater focus on non-financial reporting and the upcoming regulatory
obligations, we believe that our solution can also contribute to the consolidation of relevant
data and serve as one of the key inputs for the preparation of the non-financial report (ESG),
mainly in water resources management. Collected data can also serve as the foundation to
additionally strengthen the cooperation with the local community, consumers and other
relevant stakeholders via gamification methods, creation of educational materials and
campaigns related to ecosystem health and additionally raise awareness and initiate
engagement in the area of natural resources protection.
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Climate change mitigation and adaptation
Energy
Energy consumption in 2022 was selected as key material topic due to its clear double
materiality. It represents the leading cost and a dominant climate impact in our business
activities, and in the conditions of uncontrolled increase of prices and threatening difficulties
in supply, it gained special importance.
Quantitative indicators of water and energy consumption for the past four years for
the Group’s location at Krapinska 45 are presented in the following table.
electricity
(MWh)
steam
Electricity ENT
year
water (m³)
including
the
(tonnes)
Group
consumption
from lessees
2019
21,195
6,291
22,467
15,123
2020
17,848
6,214
23,701
16,417
2021
13,990
6,018
22,556
13,732
2022
15,802
3,768
19,466
9,162
Despite the increase in the number of employees compared to 2021 (this contributed to a slight
increase in water consumption, which is, however, still quite low compared to the previous
years), by introducing additional monitoring over significant consumers and by applying
technology solutions (for example, using waste heat from server cooling) we have significantly
reduced the consumption of steam (37%) and electricity (33%).
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Main achievements in 2022
(compared to 2019)
.
Waste reduced by 40.08%
Water consumption reduced by 25%
.
.
21% less consumption of electricity for the office part of business
operations
48% less consumption of electricity for the production part of
.
business operations (servers and server cooling)
.
Realized CO2 reduction compared to 2021 by more than 1600 t
Plant steam consumption (kWh)
4.500.000
4.000.000
3.500.000
3.000.000
2.500.000
2.000.000
1.500.000
1.000.000
500.000
0
2019
2020
2021
2022
Electricity consumption (MWh)
18.000
16.000
14.000
12.000
10.000
8.000
6.000
4.000
2.000
0
2019
2020
2021
2022
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Business trips and employees’ daily commute
In 2022, many of the Group’s employees continued to work remotely due to pandemics, which
contributed to a reduction in related emissions from traveling by 2.7 kilotons, and it is
estimated that daily commuting accounts for approximately 12% due to working remotely.
Although the indicators of emission reduction from traveling compared to 2019 (49%) are
more than encouraging, in the upcoming period the Group will focus even more on the
reduction of global emissions from remote work and commuting.
Energy performance
Through energy efficiency project, significant funds have been invested in the infrastructure in
order to, among other things, manage resources in a more efficient way. The project enabled
that the waste heat from server cooling be used for heating the premises and sanitary water
and, in addition to the fact that this reduced the consumption of steam for heating the
premises, the consumption of water, as our priceless resource, was also reduced.
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Transition to circular economy
Waste
Facts and figures
Waste generated at Ericsson Nikola Tesla’s location in Zagreb, Krapinska 45, in 2022
Key waste code
Waste name
Amount (in kg)
Paper
and
cardboard
15 01 01
packaging
42,430
20 01 01
Archive
10,450
20 01 02
Flat glass
880
15 01 02
Plastic packaging
14,740
15 01 03
Wooden packaging
14,680
17 04 05
Iron and steel
10,000
20 01 21*
Fluorescent tubes
260
16 02 13*
Electric and electronic waste
11,225
20 03 06
Sewage sludge
5,110
15 01 07
Packaging glass
470
20 01 33
Small batteries
230
16 06 01*
Batteries and accumulators
11,456
Total (kg)
121,931
An efficient circular economy for ENT Group is not a compromise, but a prerequisite for a
cleaner planet that also justifies financial investments in the long term. An efficient and
sustainable use of materials is part of our approach to circular economy. Processes that imply
the selection of ecologically acceptable materials, product design, efficient and re-use and
efficient recycling are becoming more important for ENT Group’s stakeholders.
In line with the applicable laws and the new Ordinance on Waste Management in force as of
September 2022, we approach business processes responsibly and continuously improve them
with the aim to optimize the amount of created waste, from the process of ordering and
selecting ecologically acceptable products, through revision of suppliers in the sense of
checking their processes, to selecting responsible collectors and waste managers. In the last
few years we have, therefore, reduced the amount of packaging or replaced it with one that is
ecologically more acceptable. In addition to a responsible approach of separating waste, we
have additionally, by selecting responsible waste managers (for example, paper and paper and
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cardboard packaging), selected partners that can fully apply the circular business model in the
location where they operate, from collecting packaging waste, production of raw material from
the collected waste to production of new packaging and packaging solutions.
Pollution prevention and control
In 2022, not a single incident was recorded related to environmental pollution.
In terms of pollution, the greatest risks for the company have been recognized through the
identification of environmental aspects. They were then transferred to targets that are
monitored through various processes with the aim to reduce the impact on the environment.
As one of the aspects, waste is in continuous company’s focus with the primary aim to reduce
its creation. Depending on the number of employees on site and the scope of work, the amount
of waste per category has been decreasing year after year. Additionally, owing to a consistent
approach of separating waste, we have also brought the amount of municipal solid waste to a
minimum.
In line with the detected risks in relation to the environment, a new plan of measures due to
extraordinary pollutions has been introduced (fuels from generators and vehicles, leakage due
to battery rupture, etc.). In line with the plan, training has been carried out to reduce the risks
of an unwanted outcome.
Biodiversity
The Group’s business activities take place in the premises in urban areas, which means that the
impact on biodiversity is limited. Last year no direct negative impact on biodiversity was
recorded. Additionally, we control the level of noise when performing daily activities, which we
have established as an additional protection measure.
We are included in the project of revitalization of swamp ecosystem of Hutovo blato, which
aims to minimize the impact of the hydro power plant Čapljina on this nature park. According
to the analysis made within the project carried out by a non-governmental organization World
Wild Fund for Nature (WWF), there has been a significant change in the hydrological regime
in the Nature Park with a direct impact on natural habitats and biodiversity of the area which
could result in the complete loss of the swamp system in this area within the next 35 years
should there be a lack of reaction and positive changes in the way hydrological resources are
used. The implementation of Ericsson Nikola Tesla’s eEnvironment platform enabled advanced
monitoring and the control of use of hydrological resources thus achieving an indirect impact
on the biodiversity protection.
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Key responsibilities that help us in achieving our sustainability goals
The development of products, solutions and services while taking into account
the life cycle and the perspectives of circular economy - aiming at a high energy
efficiency and sustainable materials and design choice
Optimization of processes and application of new technologies to reduce energy
consumption in the production cycle
Introducing remote work with the aim to reduce daily commuting
We have been following all the demands of products, guidelines and
recommendations that refer to the environment, and we oblige our suppliers to
do the same
We have been actively monitoring and reporting about all the risks or incidents
with a potentially negative impact on the environment
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Key Performance Indicators in line with the EU Taxonomy
Context
Environmental and climate ambitions of the European Green Deal include a proactive
contribution of all economic activities and subjects. In this context, the European Union observes
information and communications technologies in two aspects: unstoppable growth of this sector
(specially in data traffic segment) and its share related to greenhouse gas emissions, as well as
the support of this sector to other sectors in achieving sustainable business. As the directive
states, these technologies can, as an integral part of other economic activities, enable other
sectors to achieve their goals of climate change mitigation, for example with solutions that would
be useful to reach decisions on reduction of greenhouse gas emissions. Furthermore, to improve
technological and economic sustainability of all sectors, the contribution of research,
development and innovations has been recognized.
Determining taxonomy eligible and non-eligible activities of the Ericsson
Nikola Tesla Group
When determining taxonomy eligible and non-eligible activities, the National Classification of
Activities which is aligned with the statistic classification of economic activities in the EU
(NACE) in Annex I and II of the Delegated Regulation 2021/2139:
-
ANNEX I
Criteria of technical screening based on which it is determined under which conditions it is
considered that an economic activity significantly contributes to climate change mitigation and
whether this economic activity causes significant harm to any other environmental objective
-
ANNEX II
Criteria of technical screening based on which it is determined under which conditions it is
considered that an economic activity significantly contributes to climate change adaptation and
whether this economic activity causes significant harm to any other environmental objective.
We had analyzed our activities according to both annexes and have determined that the
majority of our business activities is not covered by the technical screening criteria. Technical
criteria for information and communications technology as a sector have not been fully
developed yet, which significantly limits the mentioned reporting for our Group.
Furthermore, since the mentioned delegated regulations that contain technical screening
criteria for the remaining environmental goals have not yet been adopted, we are publishing
only key performance indicators in line with Article 8. of the Taxonomy Regulation for the
financial year 2022 in relation to the objectives of mitigation and/or adaptation to climate
change, in addition to meeting do no significant harm criteria for other environmental objectives
(including also the remaining four objectives), and meeting the minimum safety criteria, as
required by the Commission Delegated Regulation (EU) 2021/2139.
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Being guided by the principle of concrete, material reporting, we would precisely like to
highlight the activities related to climate objectives on the one hand, while on the other hand
they meet our own criteria in a way that: they generate or will generate revenue, they
correspond to descriptions from Annex I and Annex II and meet technical screening criteria.
We submit the report for the following activities, bearing in mind the mentioned approach.
Division of business activities as taxonomy eligible and non-eligible
activities
Taxonomy eligible activities
Taxonomy non-eligible
- Development of data-driven solutions for
- Other ICT products and services
GHG emission reductions
- Computer programming
Evaluation of taxonomy eligible activities in line with compliance criteria
Name of activity in line Description of activity
Evaluation
with Annex I and II of
in line with Annex I and of compliance
the Delegated
II of the Delegated
Regulation 2021/2139 Regulation 2021/2139
8.2
Data-driven solutions for Developing or using ICT Not aligned
Annex I GHG emission reductions solutions that aim to
collect, transfer and store - These are solutions for
data, as well as their collecting data of various
modeling and application environmental
if these activities mainly parameters and their
refer to data provisioning more efficient
and analysis that enable management in the
the reduction of GHG context of protection and
emissions. These ICT consumption of
solutions may, among resources, i.e., indirect
other things, include the reduction of harmful
application
of emissions.
decentralized
technologies
(i.e.,
distributed
ledger
technologies), Internet of
Things, 5G technology
and artificial ntelligence.
The economic activities in
this category can be
categorized in several
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NACE codes, especially
J61, J62 and J63.11 in line
with
the
statistical
classification of economic
activities that was
established by Regulation
(EC) No 1893/2006.
8.2
Computer programming,
Expert knowledge in
Not aligned
consultancy and related
information technology,
Annex
activities
programming, changing
- Revenue is not included
II.
and testing programs and because software
program support;
development belongs to
planning and designing
enabling activities
computer systems with
- Current expenses
integrated computer
related to this software
hardware, software and
development do not
communications
enable greater resilience
technologies; managing
to climate change effects
on site and operation of
client’s computer
systems, facilities and
equipment for data
processing; and other
expert and technical
computer activities.
The economic activities in
this category can be
categorized in NACE code
J62 in line with the
statistical classification of
economic activities that
was established by
Regulation (EC)
No 1893/2006.
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Key Performance Indicators according to Article 8 of the Taxonomy
Regulation
In accordance with the Delegated Regulation 2021/2178, we report on shares of revenue,
capital expenditure and operating expenses which are eligible /non-eligible, i.e., aligned/not
aligned activities in total consolidated income, capital expenditure and operating expenses.
Accounting policies
- Revenue = sales revenue
- Capital expenditure (CAPEX): items of property, plant and equipment, costs of
replacement of parts of certain items at the moment when they take place, from which
economic benefits are expected in the future
- Operating expenses (OPEX): direct expenses of projects and expenses that refer to
research and development, measures of operating maintenance of buildings, short-term
lease, maintenance and repair and all other direct expenses that refer to everyday
maintenance of property, plant and equipment that are presented in consolidated
Financial Statements of profit and loss as other business expenses
The description of accounting categories for projects encompassed by taxonomy
-Revenue:
For registered projects, revenue includes sales revenue from products and revenue from
services.
- Capital expenditure (CAPEX):
For registered projects, we have not established related capital expenses for 2022.
- Operating expenses (OPEX):
For registered projects, operating expenses include work time on projects, related
traveling expenses, expenses of assets depreciation that is used for observed projects
and services of external suppliers needed for project execution.
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Note: The percentage is showed as zero, because the values are small.
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Note: The percentage is showed as zero, because the values are small.
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SOCIAL RESPONSIBILITY
ESG
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Social responsibility
In the area of social responsibility, we have remained focused on three main areas that are
closely correlated both with the current needs of the society as well as the Company’s long-
term goals and our comparative advantages. These are education, partnerships for socio-
economic development and helping the community. This business decision is in line with our
approach of a relevant partner for positive changes in the society, which is how we wish to be
perceived and recognized through our actions towards various stakeholders.
Digital inclusion: young people in focus
In 2021, the European Commission adopted a plan for digital transformation of the society
and the economy until 2030 titled “Path to the Digital Decade”. It states the Union’s ambitions
in the field of digital skills, digital infrastructure and digitalization of business and public
services which have been recognized as a stimulus to the overall development. It contains a
frame for management which is based on a yearly mechanism of cooperation with member
states in order to achieve the targets of the digital decade by 2030 at the level for the entire
Union.
Digital skills are especially important to successfully achieve these targets. Two targets have
been defined in this area:
- to increase the share of adults with basic digital skills from current 56% to 80%;
- to raise the number of ICT experts from the current 8.4 million to 20 million.
With a desire to make a concrete contribution to this important socio-economic agenda,
Ericsson Nikola Tesla Group has been carrying out concrete programs to increase digital
inclusion and ensure a greater representation of STEM professions among young people.
Programs for young people
Despite the fact that IT sector is one of the sectors most in demand in the labor market,
adequate interest for the professions that include the skills and knowledge for work in this
industry is missing, as do sufficient enrollment quotas in educational programs. Despite the
predictions that the accelerated progress of AI will probably erase some of these professions
in the fairly near future, it is clear that filling in this deficit will continue to be a challenge due
to an overall turn towards the digital sphere.
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Learning about the opportunities
For many years we have insisted on a stronger bond between the economy and the academic
community. Through synergy between educational institutions and business sector, it is
possible to achieve a quality step towards developing knowledge and skills in line with the
needs of today’s market, and we are therefore present at most STEM faculties and
polytechnics.
20+ events for students
1:1 conversation with more than 2,000 students
These events were a mix of providing information to students about a range of jobs our
company offers them and educations through various workshops where students, with the
assistance of the company’s experts, had the opportunity to create concrete solutions.
The already traditional Ericsson Nikola Tesla Summer Camp was held too. In its 21st edition,
it connected young people craving technology knowledge with our experts who helped them
to convert their ideas from concepts into reality.
Main events
JobFair (FER, Zagreb)
In a competition of more than 130 companies, approximately 20 experts from Ericsson Nikola
Tesla from all key business areas presented the company’s fields of operations and held
workshops.
Dump Days (FESB, Split)
Over the past six years, Dump Days at the Faculty of Electrical Engineering, Mechanical
Engineering and Naval Architecture have grown into one of the most influential and visited IT
events. The company participated in Campfire Talks, Fly Talks, and held a demo in the
exhibition area.
Career Days at the Polytechnic of Rijeka (VELERI, Rijeka)
Shortly before opening our office in Rijeka, we presented our company at the Polytechnic in
Rijeka. As stated by the career center manager, Sandra Debeljak, PhD, Ericsson Nikola Tesla
has many positions for which the students of Polytechnic in Rijeka can compete.
Meet The Mathematicians at the Faculty of Science (PMF) in Zagreb
Meet The Mathematicians is a classic speed dating event that has profiled over the years as a
recognizable brand.
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Visit from students from Zagreb University of Applied Sciences (TVZ)
As part of Mc2 student competition at TVZ, the interested students visited Ericsson Nikola
Tesla’s Zagreb office where they learned about solutions, products and services which are
developed at the company’s R&D through a series of lectures.
A Walk Through Careers (Croatian: Karijerni špancir) at the Faculty of Organization and
Informatics (FOI) in Varaždin
The Faculty of Organization and Informatics is interesting as their students enter the labor
market with a specific knowledge set which brings most benefits to professions that require a
mix of development and business.
Career Day at the Faculty of Transport and Traffic Sciences (FPZ)
We participated at FPZ’s Career Day for the second time, with a renewed model for our popular
Lego Smart City. Various IoT models are demonstrated on the model, with small latency and
high speeds of 5G network, and it is especially interesting to students of the Faculty of
Transport and Traffic Sciences.
Career Day at the Faculty of Maritime Studies in Rijeka (PFR, Rijeka)
This faculty has, in addition to other courses, quality courses for learning skills of future
software developers. Similarly, as at the Polytechnic in Rijeka, the opening of the company’s
office in Rijeka was also welcomed at the Faculty of Maritime Studies, especially after learning
about the range of jobs the company offers and fields in which it operates.
Let’s Talk Reboot (FER, Zagreb)
This program is characterized by a special concept: through targeted stories of senior and
juniors, the students learn about everything the company develops and what they can do. The
entire concept is based on the classic show & tell approach, due to which the sessions also
include a demo on the hardware we work with, and everything happens live.
Open Doors Day and Career Day (FERIT, Osijek)
In terms of STEM faculties, Open Doors Day and Career Day (DOVIK) at the Faculty of
Electrical Engineering, Computer Science and Information Technology Osijek is one of the
important student jobs fairs. Ericsson Nikola Tesla has had an office in Osijek since 2018 and
has almost a hundred employees and students, mostly from FERIT.
Career Week at the University of Rijeka (UNIRI, Rijeka)
The first UNIRI Career Days at the university campus in Trsat attracted many students as well
as companies offering jobs in the Rijeka area.
Workin’ in Science (PMF, Zagreb)
At Career Day at PMF, the activities of Digital Society, Customer Solutions and Services and
Research and Development Center units were presented.
Career Week at the Faculty of Electrical Engineering, Mechanical Engineering and Naval
Architecture (FSB, Zagreb)
A few colleagues who graduated from Zagreb’s FSB work at Ericsson Nikola Tesla Group.
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Interdisciplinary teams consisting of experts of various profiles enable the desired effect of
synergy and thinking outside the box. The experiences of mechanical engineers who work on
software development have served to present new possibilities for students from this faculty.
Career Speed Dating (FER, Zagreb)
The popular FER’s CSD nurtures the form of targeted eight-minute conversations with students
and connects students with employers in a concrete way.
For better representation of girls in STEM
Although there are positive trends, there is still a great need to promote gender equality in IT
sector. This can be accomplished through various activities, such as promoting STEM
education for girls, supporting women in IT through mentoring and a network of professional
contacts by creating a more positive environment for all IT employees. Only through joint
efforts of all stakeholders in the industry can we create a more inclusive and fairer workplace
for everyone.
In 2022, Ericsson Nikola Tesla joined several initiatives whose direct or indirect goal was
gender equality. We would like to highlight the panel titled “Why gender equality is important
for STEM”, held as part of the Girls own STEM project by the Bioteka association, which won
the first place in a global competition of projects at the international STEM competition of the
Global Giving foundation in the field of education in 2022.
Hiring students
In addition to all these programs, the company offers students a cooperation through student
jobs, support in writing various papers, etc. In the last few years we have, on average,
cooperated with approximately 250 students per year, and in 2022 we cooperated with almost
300 students.
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Helping the community and partnerships for development
Mutual solidarity, assistance and empathy, as well as helping the community where we live
and do business, are an integral part of Ericsson Nikola Tesla Group value system that has a
very developed segment of social responsibility. Caring for people is at our focus, therefore in
2022 we carefully monitored what happens in our close environment. We have invested
significant funds to realize various humanitarian actions and initiatives with a valuable aim of
helping people affected by war as well as health, social and other challenges. We have also
improved solutions for a better inclusion of all citizens in the digital environment.
New speech therapy equipment for quality correction of speech and
language therapy
As a leader in innovative ICT solutions through which we impact lives of many people
worldwide on a daily basis, we are very much aware of our role and responsibility on the one
hand, as well as the importance of quality way of communicating on the other hand. Precisely
due to this reason, and on the occasion of 40 years of successful business operations of our
office in Split, we donated electroacoustic verbotonal devices to the Center for upbringing and
education “Slava Raškaj” in Split. These devices are used for individual speech therapy and
speech development exercises for children with speech and language disorders. These modern
technological devices contribute to a faster and more successful rehabilitation of the Center’s
users aiming to train them to actively participate in community life, as well as their inclusion in
further education. The realization of the donation was realized within the corporate
partnership of our company with the “RTL helps children” association.
Solidarity with the people of Ukraine
While the first months of 2022 were still marked by the global fight against coronavirus, one
event pushed the pandemic into the background. The war in Ukraine, along with great human
and material damage, has also created a new humanitarian crisis. In addition to refugee wave,
almost every aspect of normal life of the entire population has been interrupted or hindered.
The Group and the employees have participated in providing concrete help since the conflict
started. We have responded to UNICEF’s call for solidarity with children and families of Ukraine
in terms of financial aid for taking care of them, which was also accompanied by a significant
financial donation to Croatian Red Cross for the same purpose.
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For Zero Hunger societies
Aware of the fact that not everyone has the same opportunities, possibilities and conditions to
live a decent life, the Group has once again donated money to buy food for the needs of the
users of the Saint Joseph’s Church in Zagreb, Center for the Homeless of the association Most
in Split, Caritas soup kitchen in Osijek, and Duga charity association in Vukovar. This action is
also regularly accompanied by individual help from the employees themselves to various
institutions and associations.
Together for mental health of children and young people
Wearing the same T-shirts, on thousands of trails, our employees took part in Milky Way for a
single common goal – improving the care for mental health of children and young people in
Croatia and have achieved an excellent result as one of the three best teams of this year’s race.
This is UNICEF’s humanitarian race that became an important platform for raising awareness
and gathering resources for key investments for children’s welfare through UNICEF programs
in Croatia, and in which Ericsson Nikola Tesla’s employees participated for the fourth
consecutive year. The achievement of our team members contributed to implementing mental
health support programs for children and pupils at schools “Help us to”, carried out by the
Croatian Institute of Public Health, with the support of Education and Teacher Training
Agency.
Drops that mean life
Organized by Ericsson Nikola Tesla, Red Cross, and Institute for Transfusion Medicine, at the
company’s location in Zagreb, in 2022 the voluntary blood donation events were successfully
organized twice. By voluntarily donating blood, for many years our employees have been
showing solidarity and the desire to help by giving complete strangers a new opportunity to
get treatment and a quality life.
Better engagement of citizens in the modern digital environment
Ericsson Nikola Tesla Virtual Assistant (EVA) is an app developed with the aim to make life
easier for persons who are visually impaired or have difficulties using modern technologies.
This is an app that was fully developed at Ericsson Nikola Tesla and that makes it much easier
for persons who are visually impaired, have additional motor activity impairment or difficulties
in using modern technologies to use smart phones. This is the only app in our market that
“understands” Croatian, is free, and is available for Android and iOS. In addition to making life
easier, EVA also enables a better inclusion of all citizens in the modern digital environment.
The first version of EVA was put into production at the end of 2018, and with the desire to offer
better solutions and the best user experience to users, throughout the years the app was
updated with various options. A new, improved version of this app was put into operation in
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2022.
By developing EVA, experts from Ericsson Nikola Tesla have once again showed the way in
which they positively impact people’s lives and transform them. With their solution they made
people’s lives easier and improved the everyday life of persons who until now did not have the
option to individually use the advantages offered by the modern technology.
Smart school
In cooperation with the Rikard Katalinić Jeretov elementary school, Ericsson Nikola Tesla has
been carrying out a “Smart School” program. The program aims to educate pupils and raise
their awareness about the application of new technologies in smart homes and schools, as well
as to promote energy efficiency. As part of the project, Insulae platform was installed in the
school with the aim to optimize energy consumption, understand and use the monitoring
system and manage electrical devices at the school and apply the analysis of collected data,
their interpretation and visualization.
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Collaborate with us
This report and all the important information about Ericsson Nikola Tesla can be found at
https://www.ericsson.hr/en/homepage.
If you wish to find out more, give your comments, opinions or suggestions, make sure to
communicate with us:
Ericsson Nikola Tesla d.d.
Marketing, Communications & Corporate Social Responsibility
Krapinska 45
10000 Zagreb
Croatia
Telephone: +385 1 36 54 556
Fax: +385 1 36 53 156
E-mail: etk.company@ericsson.com
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Awards and recognitions
Ericsson Nikola Tesla wins “Hrvoje Požar” award
At the annual “Hrvoje Požar” award ceremony of the Croatian Energy Association and “Hrvoje
Požar” Foundation, Ericsson Nikola Tesla received the annual award in the category for the
Realized Project of Rational Energy Management for the project “Increasing energy efficiency
and using renewable energy sources at Ericsson Nikola Tesla d.d.”. Due to this project
realization, it is expected that Ericsson Nikola Tesla campus will annually enjoy energy savings
of 4.6 million kWh, with CO2 emissions reduced by 1400 t.
Ericsson Nikola Tesla wins Croatian Index of Sustainability award
At the 14th Sustainable Development Conference, the most successful Croatian companies in
this area were awarded with the Croatian Index of Sustainability (HRIO) Awards, and Ericsson
Nikola Tesla was awarded in the category Sustainable Corporate Governance.
ECO Lider Invest recognition for the investment in the new Data Center
In 2016, business weekly Lider launched the Lider Invest project within which the best
production investments in Croatia are awarded. Ericsson Nikola Tesla received the ECO Lider
Invest recognition for the investment in the new Data Center.
Gloria Business Talks award for the most successful company in the
category IT&Tech led by a woman
In cooperation with the Financial Agency (FINA), Gloria magazine has awarded the most
successful women of Croatian business across various industries and most successful
companies from different industries managed by women. Ericsson Nikola Tesla received the
award in the IT&Tech category, based on its 2021 business results.
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Recognition for the best compliance with the Code of Corporate
Governance
At the conference “Corporate Governance in Croatia – Sustainability and Trust in Challenging
Times”, Ericsson Nikola Tesla received the award for the best compliance with the Code of
Corporate Governance among the issuers on the Regular Market of the Zagreb Stock
Exchange, according to 2021 indicators.
Ericsson Nikola Tesla receives award for building public trust
At the Zagreb Stock Exchange award ceremony, Ericsson Nikola Tesla received the “Building
Public Trust Award” for the most transparent reporting, which is awarded by PwC Croatia in
cooperation with the Zagreb Stock Exchange.
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Objectives and achievements
Ericsson Nikola Tesla’s sustainability and corporate responsibility objectives are aligned with
the company’s strategy. The objectives are reviewed and reported on annually and reflect our
efforts to reduce risks and increase positive impacts.
Positive impact objectives
Long-term objective
2022 achievement
Realize projects and
Three cases were implemented in the Industry & Society
solutions for customers
segment:
related to achieving
Sustainable
Small-scale water supplies
Development
Goals
The project WaterQ IRI2 which deals with risks and estimation
(SDGs)
of impacts of drinking water on people’s health, has entered
into its final implementation stage, i.e. experimental
development. In the project’s final stage, the entire system is
installed (WaterQ sensor, platform and mobile app) on pilot
locations in public water supplies (Water Supply Krk, Sinj and
Ploče) and small-scale water supplies. It is especially
important to highlight the pilot locations in small-scale water
supplies Kalinje, Žumberak and Radočaj Brodski. These are
rural communities that, due to inaccessibility of the public
water supply infrastructure, have developed their own system
of drinking water distribution. The problem of this type of
infrastructure is that this is a private infrastructure that is not
under the jurisdiction of the Croatian Institute for Public Health
and adequate regular tests are not performed, while at the
same time the analyses show that as many as 37% of all the
samples show microbiological contamination. It is estimated
that in the Republic of Croatia, approximately 54,000 people
drink this kind of water, while at the EU level, this figure
increases up to as many as 65 million. By implementing our
system in such rural communities, Ericsson Nikola Tesla
ensures the population an insight into the quality of drinking
water and enables them to share data with the public health
institutions, whereby the local community gains an equal
access to drinking water as the rest of Croatia’s population
living in more developed parts of the country. Primarily, the
risks related to outdated infrastructure, inadequate sanitation
protection and vulnerability to meteorological conditions
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(heavy rainfall) are solved.
National access point for multimodal information in transport
In cooperation with our partner Realis, we implemented a
project for Hrvatske ceste that establishes a National access
point for multimodal information in transport as well as
develops a route guide as part of the provision of multimodal
information services in transport. EU Member States are
establishing their national access points in order to make it
easier to access, enable a simple exchange and reuse of traffic-
related data. The application of such information and
communication technologies in traffic significantly changes
the overall traffic system, offers many benefits for the society
and economy, and has a potential to reduce traffic’s negative
impact on the environment.
ENT Smart Energy app
It was recognized as an optimal system for collecting,
processing and visualization of sensor data for monitoring
environmental, energy and climate conditions on school
premises, as well as an educational tool with the purpose of
raising ecological awareness and energy literacy of elementary
school children. In 2022, ten schools from Gorski Kotar area
participated in the project. In addition, several educational
workshops were held for teachers and pupils with the aim of
introducing the solution’s functionalities to the users and
raising awareness about the benefits of applying smart
solutions with the purpose of systemic energy management.
Climate actions:
Despite a larger number of employees on locations and more
Until 2030, cut our own
business travels compared to 2021, by optimizing business
emission of CO2 in half
processes and introducing new technologies and measuring in
(absolute amount) as
2022, we have reduced the electrical energy consumption by
compared to 2019.
33%, and technological vapors by 37%, which contributed to
the reduction of CO2 emissions by more than 1600 t.
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Risk mitigation objectives
Long-term objective
2022 achievement
Responsible sourcing:
100% achievement
– percentage of audits performed out
of total audits planned (with the
weight of 40% in total result)
– percentage of closed findings in total
audit findings (with the weight of 60%
in total result). Audits without findings
will be treated as one closed finding.
Compliance program
100% of active employees completed the
courses regarding anti-corruption, data
protection, security and health protection.
For more than 400 employees who could be
exposed to risks due to their roles in the Group,
an advanced education titled “Fair market
competition, anti-corruption and public
procurement” was held.
New Bylaws on Internal Reporting of
Irregularities were passed, Persons of
Confidence and their Deputies were elected for
three companies of ENT Group (Ericsson Nikola
Tesla d.d., Ericsson Nikola Tesla Servisi d.o.o.
and Libratel d.o.o.). In this way, the possibilities
and the channels to report irregularities were
significantly improved, with additional
protection of the person reporting, in line with
the new Whistleblower Act.
Third-Party Management 2.0
Through digitalization program, activities in the
systems of contracting and checking business
partners were automated, thus enabling
greater efficiency and transparency for the
requirements of further activities related to
business partners.
Occupational Health and Safety (OHS)
1.
OHS-related audits: internal
20 occupational health and safety audits were
audits, supplier audits, field worker
carried out at various locations in the company
audits / 20 audits, depending on the
and at the suppliers’ locations.
priorities
2.
Awareness
about
the
Instructions and forms were updated and
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importance of reporting accidents and
published on the intranet, the information was
near misses through educational
presented in the OHS newsletter, and in this
information that will be delivered to all
way the OHS incident reporting process was
employees / All employees
explained to all employees in detail.
3.
OHS Newsletter / twice a year
OHS Newsletter was started, and the
employees also received information about
novelties and current topics regarding OHS via
4.
OHS team meetings / four times
Infobox.
a year
Three OHS team meetings were held, as well as
5.
Workshops and lectures for
three meetings of the Occupational Health and
employees regarding OHS (working in
Safety
Committee.
an ergonomic manner, working from
home, health care topics, etc.) / 4
Three My Health lectures were held within the
workshops and/or lectures
PrevENTion program, as well as two online
training cycles (functional training and yoga)
6.
Education of persons for
where employees could exercise with trainers.
providing first aid at locations in
Furthermore, a group excursion to Sljeme was
Zagreb, Split, Osijek and Rijeka / 15
organized as part of the Move Your Body
employees
module.
7.
Improving the OHS system by
Due to organizational changes, the goal was
introducing new tools
transferred to the next year.
New OHS tool to manage the occupational
health and safety system has been developed
and implemented
within the Digital
transformation program.
Annual report
155
Ericsson Nikola Tesla Group
Statement on the application of the Code of Corporate
Governance
Ericsson Nikola Tesla d.d. was among the first companies in Croatia to adopt its own Code of
Corporate Governance (in April 2005), based on the legislation of the Republic of Croatia and
the recommendations published in OECD Corporate Governance Working Papers. These
principles clearly describe and define the rights and obligations of the Management Board,
Supervisory Board and shareholders (https://www.ericsson.hr/en/corporate-governance).
The company also applies the Corporate Governance Code, adopted by the Croatian Financial
Services Supervisory Agency (HANFA) and the Zagreb Stock Exchange. The Code has been in
force as of January 1, 2021, and is available on the website of the Zagreb Stock Exchange
(https://zse.hr/en) and HANFA (https://www.hanfa.hr/en/). The Company operates in line
with good practice of corporate governance and mostly adheres to the recommendations of
the Code. The explanation of deviations from certain recommendations, whose application is
currently not practical for the company, are listed in the Annual Questionnaire on Compliance
with the Corporate Governance Code, which was approved by the company’s Supervisory
Board. The Questionnaire is available on the ZSE and the company’s website.
Deviations from the Corporate Governance Code are as follows:
Chapter 3: Appointment of the Management Board and the Supervisory Board members
The role of the nomination committee
The Supervisory Board does not have an established nomination committee; the
implementation of these activities is ensured by the Chairman of the Supervisory Board
pursuant to the Rules of Procedure of Ericsson Nikola Tesla d.d.’s Supervisory Board.
Chapter 4: The Supervisory Board and its committees
Composition of the Supervisory Board
The Supervisory Board of the Company has five members, of which two members were elected
on the proposal of the largest shareholder, one member is an employee representative, and the
remaining two members are independent.
Committees of the Supervisory Board
The Supervisory Board has an established Audit Committee; however, it does not have
nomination committee and remuneration committee. Due to more efficient work and the fact
that the Management Board has one member, the tasks of the nomination committee and
remuneration committee are carried out by the Chairperson of the Supervisory Board pursuant
to the Rules of Procedure of Ericsson Nikola Tesla d.d.’s Supervisory Board.
Annual report
156
Ericsson Nikola Tesla Group
Chapter 5: Management Board
Composition of the Management Board
The Management Board has one member – the Company’s Managing Director. In its work, the
Management Board closely cooperates with the Executive Management that consist of, in
addition to the Managing Director, the directors of main organizational units. Furthermore, in
order to secure additional transparency when reaching certain important decisions, the
following committees have been established: Risk and Compliance Board, Investment Board,
Innovation Steering Committee, Technology Management Board, Group’s Digital
Transformation Program Board, Steering Committee for Real Estate.
Management Board duties
Since the Management Board consists of one member, the responsibilities and the way of
working of the Company’s Managing Director are prescribed by the Company’s Articles of
Association, Code of Corporate Governance of Ericsson Nikola Tesla, and the Governance
Model of Ericsson Nikola Tesla Group.
Chapter 6: Remuneration of the members of the Management Board and the Supervisory
Board
Remuneration of the Management Board members
Remuneration Policy prescribes that the Company’s Management Board may not dispose of
the shares it was attributed as part of the remuneration policy for at least a year since the date
on which the shares were awarded. Share options are not part of the package of the
Management Board remuneration, therefore, there is no defined period during which the
Management Board should not exercise these options from the date of grant. The
Remuneration Policy does not include the provisions that will specify in more detail the
circumstances in which part of the Management Board member remuneration would be
withheld or recovered.
Annual report
157
Ericsson Nikola Tesla Group
Financial statements of
Ericsson Nikola Tesla
Group and Independent
Auditors’ Report
Annual report
158
Ericsson Nikola Tesla Group
Ericsson Nikola Tesla d.d.
Consolidated Financial Statements
and Independent Auditors’ Report
31 December 2022
Annual report
159
Ericsson Nikola Tesla Group
Ericsson Nikola Tesla Group
Profile of the Parent Company and
its subsidiaries (the Group)
History and incorporation
Ericsson Nikola Tesla d.d. (the Parent Company) is a Croatian company with over seventy years of continuous operations. It
is a leading supplier and exporter of specialized telecommunications equipment, ICT solutions, software and services in
Central and Eastern Europe.
The Parent Company was founded on 13 May 1995, as a result of the privatization of the enterprise Nikola Tesla - Poduzeće
za proizvodnju telekomunikacijskih sistema i uređaja, po.
Ericsson Nikola Tesla d.d. has prepared these consolidated financial statements for the Parent Company and its four active
subsidiaries:
two are domiciled in Croatia:
Ericsson Nikola Tesla Servisi d.o.o.
o
Libratel d.o.o.
o
One is domiciled in Bosnia and Herzegovina,
Ericsson Nikola Tesla BH d.o.o.
o
One is domiciled in Belarus:
Ericsson Nikola Tesla BY d.o.o.
o
Principal activities
The principal activities of the Group are research and development of telecommunications software and services, design,
testing and integration of total communications solutions, managed services, supply and maintenance of communications
solutions and ICT solutions, towards customers within the Ericsson Group, customers in the Republic of Croatia, and Bosnia
and Herzegovina, and several customers in Central and Eastern Europe.
Ericsson Nikola Tesla d.d. is a joint-stock company incorporated in Croatia. The headquarters of the Parent Company are in
Zagreb, Krapinska 45.
Code of Corporate Governance
The Group applies the Code of Corporate Governance of the Zagreb Stock Exchange and meets the
obligations derived therefrom, with the exception of provisions whose application is not practical at the
moment.
Annual report
160
Ericsson Nikola Tesla Group
Ericsson Nikola Tesla Group
Profile of the Parent Company and
its subsidiaries (the Group)
(continued)
Supervisory Board, Audit Committee, Management Board and executive management of Ericsson Nikola
Tesla d.d.
Supervisory Board
The Supervisory Board members during 2022 and up to the release of these consolidated statements were:
Franck Pierre Roland Bouétard
Chairman
Reappointed on 27 June 2022
Olgica Spevec
Member; Vice-Chairman
Appointed on 13 June 2019; elected for
Vice-chairman of Supervisory Board on 17
December 2020
Petra Vranjes
Member
Appointed on 29 June 2021, member until
1 January 2023
Ana Vrsaljko Metelko
Member
Appointed on 29 June 2021
Petar Šimundža
Member and employees'
Apppointed on 29 November 2022
representative
Vladimir Filipović
Member and employees'
Appointed on 29 November 2018, member
representative
until 29 November 2022
Audit Committee
The Audit Committee members during 2022 and up to the release of these consolidated statements were:
Olgica Spevec
Chairman
Appointed on 17 December 2020
Petra Vranjes
Member
Appointed on 12 July 2021, member until
1 January 2023
Vesna Vašiček
Member
Appointed on 21 February 2017
Annual report
161
Ericsson Nikola Tesla Group
Ericsson Nikola Tesla Group
Profile of the Parent Company and
its subsidiaries (the Group)
(continued)
Management Board
The Management Board has one member:
Gordana Kovačević
President
Reappointed on 17 December 2019
Executive management
As at 31 December 2022, the executive management comprised:
Gordana Kovačević
Company President
Antonija Lončar
Director, Marketing, Communications & Corporate Social Responsibility
Branka Vučemilo Elezović
Director, Legal
Branko Dronjić
Director, IT&Test Environment Operations
Damir Bušić
Director, Finance, Sourcing and Commercial Management
Darko Huljenić
Director, Research
Drago Holub
Director, R&D Center
Goran Ožbolt
Director, General Services
Hrvoje Benčić
Director, Digital Services and Operations, Networks and Media
Ivan Barać
Director, Sales and Marketing for Hrvatski Telekom and Crnogorski Telekom
Jagoda Barać
Director, Sales and Marketing for Export markets for Operators segment
Milan Živković
Director, Strategy and Business Development & GIR
Miroslav Kantolić
Director, Sales and Marketing for A1 Croatia
Tihomir Fabeta
Director, ICT for Industry and Society
Vjeran Buća
Director, Sales and Marketing for Industry and Society
Željko Antolić
Director, Human Resources
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Ericsson Nikola Tesla Grupa
Independent Auditors’ Report to the shareholders of
Ericsson Nikola Tesla d.d.
Report on the Audit of the Financial Statements
Opinion
We have audited the consolidated financial statements of Ericsson Nikola Tesla d.d. (“the Company”) and its
subsidiaries (together referred to as “the Group”), which comprise the consolidated statement of financial position
of the Group as at 31 December 2022, and its consolidated statements of comprehensive income, cash flows and
changes in equity for the year then ended, and notes, comprising significant accounting policies and other
explanatory information (further referred to as “the financial statements”).
In our opinion, the accompanying financial statements give a true and fair view of the consolidated financial
position of the Group as at 31 December 2022 and of its consolidated financial performance and its consolidated
cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by
the European Union (“EU IFRS”).
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing. Our responsibilities under those
standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of
our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our
audit of the financial statements in Croatia and we have fulfilled our other ethical responsibilities in accordance
with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of
the financial statements of the current period. These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters.
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Ericsson Nikola Tesla Grupa
Independent Auditors’ Report to the shareholders of
Ericsson Nikola Tesla d.d. (continued)
Report on the Audit of the Financial Statements (continued)
Key Audit Matters (continued)
REVENUE RECOGNITION
Revenue in 2022: HRK 2,242,084 thousand (2021: HRK 2,203,897 thousand). As at 31 December 2022: trade accounts
receivable: HRK 228,220 thousand; contract liabilities: HRK 192,240 thousand (31 December 2021: trade accounts
receivable: HRK 201,473 thousand; contract liabilities: HRK 289,976 thousand).
Please refer to the Note 1 Revenue recognition of Significant accounting policies, Note 4 c) Revenue recognition of
Critical accounting estimates and judgements, Note 5 Sales revenue and Note 6 Segment reporting in the financial
statements.
Key audit matter
How our audit addressed the matter
In the year ended 31 December 2022, the Group’s
Our audit procedures in this area included, among others:
principal revenue streams included sales of products and
Updating our understanding of and evaluating the
software, as well as provision of services, including
Group’s revenue recognition process, and testing related
installation and integration services, maintenance and
key internal controls, in particular the controls associated
support.
with project feasibility and adequacy of approvals,
Application of revenue recognition principles of the
segregation of duties, determination of revenue
relevant financial reporting standards is complex and
recognition pattern, fulfillment of contracts and
requires making significant assumptions and judgments.
procedures related to finalization of projects and
Particular complexity is associated with the following
acceptance by the customer;
factors:
Assessing the Group’s revenue recognition policy for
—
In the Group’s Networks and Digital services
compliance with relevant provisions of the financial
segment, goods and services with different revenue
reporting standards;
recognition patterns may be sold as part of one
contract or several contracts accounted for as one
For a sample of contracts with customers concluded
arrangement. The Group applies significant
during the audited year, inspecting contractual provisions
judgment, among other things, in identifying
and making inquiries of project managers and relevant
contracts which require to be combined and
finance personnel in order to challenge the Group’s:
accounted for as one arrangement, and identifying
Meeting of the contract existence criteria,
o
performance obligations therein, including those, if
including, among other things, those relating to the
any, resulting from warranties and non-returnable
parties’ commitment to their obligations and
upfront fees;
probability of collecting the consideration due;
—
Each performance obligation requires evaluation of
Identification of the contracts which require to be
o
whether it is satisfied over time or at a point in
accounted for on a combined basis and of
time. The determination requires a thorough
performance obligations within contracts. The
consideration of contractual provisions to
procedure included, among other things, assessing
understand when control of the promised products
the nature of the warranties provided to customers
or services is transferred to customers. Note 6 of
for potential consideration as performance
the financial statements provides details of the
obligations;
timing and pattern of recognition of revenue for key
revenue streams;
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Ericsson Nikola Tesla Grupa
Independent Auditors’ Report to the shareholders of
Ericsson Nikola Tesla d.d. (continued)
Report on the Audit of the Financial Statements (continued)
Key Audit Matters (continued)
REVENUE RECOGNITION (CONTINUED)
Key audit matter (continued)
How our audit addressed the matter (continued)
—
Although contracts with customers are
Determination of total contract consideration, by reference
o
usually agreed with fixed transaction price,
to contracts with customers and any subsequent
significant judgement is required in
modifications to the frame agreement, if any;
allocating the transaction price to the
o
Allocation of the contract consideration to each of the
performance obligations. The transaction
identified performance obligations, based on their
price, which is the consideration the Group
estimated stand-alone selling prices, also by reference to
expects to receive for the transfer of
the sales department’s data and the analysis of current
products and services to the customer, is
transaction prices;
allocated to the performance obligations
based on its relative standalone selling
Determination of the timing of the transfer of control, the
o
price;
resulting pattern of revenue recognition and revenue
amounts, by reference to sales invoices, inventory and
In the wake of the above factors, we considered
shipping documents, customer acceptance forms and other
revenue recognition to be associated with a
documents as appropriate.
significant risk of material misstatement in the
For a sample of customers, obtaining confirmations of the
consolidated financial statements. Therefore, the
amounts receivable outstanding as at the reporting date, and
area required our increased attention in the
challenging any significant differences between confirmations
audit and as such was determined to be a key
received and the Group’s records by inspecting the underlying
audit matter.
documentation such as contracts with customers, invoices,
shipping documents and customer acceptance forms;
Examining whether the Group’s revenue recognition-related
disclosures in the financial statements appropriately include and
describe the relevant quantitative and qualitative information
required by the applicable financial reporting framework.
Other Information
Management is responsible for the other information. The other information comprises the Management Report
and the Corporate Governance Statement included in the Group’s Annual Report, but does not include the
financial statements and our auditor’s report thereon.
Our opinion on the financial statements does not cover the other information and, except to the extent
otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial statements or
our knowledge obtained in the audit, or otherwise appears to be materially misstated.
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Ericsson Nikola Tesla Grupa
Independent Auditors’ Report to the shareholders of
Ericsson Nikola Tesla d.d. (continued)
Report on the Audit of the Financial Statements (continued)
Other Information (continued)
With respect to the Management Report and the Corporate Governance Statement, we also performed
procedures required by the Accounting Act in Croatia (“Accounting Act”). Those procedures include considering
whether:
the Management Report has been prepared in accordance with the requirements of Articles 21 and 24
of the Accounting Act,
the Corporate Governance Statement includes the information specified in Article 22 of the
Accounting Act.
Based solely on the work required to be undertaken in the course of the audit of the financial statements and
procedures above, in our opinion:
the information given in the Management Report and the Corporate Governance Statement for the
financial year for which the financial statements are prepared, is consistent, in all material respects,
with the financial statements;
the Management Report has been prepared, in all material respects, in accordance with the
requirements of Articles 21 and 24 of the Accounting Act;
the Corporate Governance Statement includes the information specified in Article 22 of the
Accounting Act.
In addition, in light of the knowledge and understanding of the entity and its environment obtained in the
course of the audit, we are also required to report if we have identified material misstatements in the
Management Report and the Corporate Governance Statement. We have nothing to report in this respect.
Responsibilities of Management and Those Charged with Governance for the Financial Statements
Management is responsible for the preparation of the financial statements that give a true and fair view in
accordance with EU IFRS, and for such internal control as management determines is necessary to enable the
preparation of the financial statements that are free from material misstatement, whether due to fraud or
error.
In preparing the financial statements, management is responsible for assessing the Group’s ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern
basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no
realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
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Ericsson Nikola Tesla Grupa
Independent Auditors’ Report to the shareholders of
Ericsson Nikola Tesla d.d. (continued)
Report on the Audit of the Financial Statements (continued)
Auditors’ Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with International Standards on Auditing will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these
financial statements. As part of an audit in accordance with International Standards on Auditing, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial statements, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override
of internal controls.
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal controls.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the Group’s ability to continue as a going concern.
If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’
report to the related disclosures in the financial statements or, if such disclosures are inadequate,
to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of
our auditors’ report. However, future events or conditions may cause the Group to cease to
continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and performance of the group audit.
We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal controls that
we identify during our audit.
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Ericsson Nikola Tesla Grupa
Independent Auditors’ Report to the shareholders of
Ericsson Nikola Tesla d.d. (continued)
Report on the Audit of the Financial Statements (continued)
Auditors’ Responsibilities for the Audit of the Financial Statements (continued)
We also provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or
safeguards applied.
From the matters communicated with those charged with governance, we determine those matters that were of
most significance in the audit of the financial statements of the current period and are therefore the key audit
matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure
about the matter or when, in extremely rare circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of doing so would reasonably be expected to
outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
We were appointed by those charged with governance on 27 June 2022 to audit the consolidated financial
statements of Ericsson Nikola Tesla d.d. for the year ended 31 December 2022. Our total uninterrupted period of
engagement is four years, covering the year ended 31 December 2019, 31 December 2020, 31 December 2021
and 31 December 2022.
We confirm that:
our audit opinion is consistent with the additional report presented to the Audit Committee of the
Company dated 21 April 2023;
we have not provided any prohibited non-audit services (NASs) referred to in Article 44 of the Audit
Act. We also remained independent of the audited entity in conducting the audit.
The engagement partner on the audit resulting in this independent auditors’ report is Domagoj Hrkać.
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Ericsson Nikola Tesla Grupa
Independent Auditors’ Report to the shareholders of
Ericsson Nikola Tesla d.d. (continued)
Report on Compliance with the ESEF Regulation
In accordance with the requirements of Article 462 paragraph 5 of Capital Market Act, we are required to
express a conclusion on compliance of the consolidated financial statements of the Group as at and for the
year ended 31 December 2022, as included in the attached electronic file FI‐ERNT‐2022‐1Y‐Revidirano‐
Konsolidirano‐EN, with the requirements of the Commission Delegated Regulation (EU) 2019/815 of 17
December 2018 supplementing Directive 2004/109/EC of the European Parliament and of the Council with
regard to regulatory technical standards on the specification of a single electronic reporting format (the “RTS
on ESEF”).
Responsibilities of Management and Those Charged with Governance
Management is responsible for the preparation of the consolidated financial statements in a digital format that
complies with the RTS on ESEF. This responsibility includes:
the preparation of the consolidated financial statements in the applicable xHTML format and their
publication;
the selection and application of appropriate iXBRL tags, using judgment where necessary;
ensuring consistency between digitised information and the consolidated financial statements
presented in human‐readable format; and
the design, implementation and maintenance of internal control relevant to the application of the RTS
on ESEF.
Those charged with governance are responsible for overseeing the Group’s ESEF reporting, as a part of the
financial reporting process.
Auditors' Responsibilities
Our responsibility is to express an conclusion, based on evidence obtained, as to whether the consolidated
financial statements comply, in all material respects, with the RTS on ESEF. We conducted our reasonable
assurance engagement in accordance with International Standard on Assurance Engagements 3000 (Revised),
Assurance Engagements Other than Audits or Reviews of Historical Financial Information (ISAE 3000) issued by
the International Auditing and Assurance Standards Board.
Work performed
A reasonable assurance engagement in accordance with ISAE 3000 involves performing procedures to obtain
evidence about compliance with the RTS on ESEF. The nature, timing and extent of procedures selected depend
on the auditor’s judgment, including the assessment of the risks of material departures from the requirements
of set out in the RTS on ESEF, whether due to fraud or error. Reasonable assurance is a high degree of
assurance. However, it does not guarantee that the scope of procedures will identify all significant (material)
non‐compliance with the RTS on ESEF.
In respect of the subject matter, we have performed the following procedures:
obtaining an understanding of the tagging process;
evaluating the design and implementation of relevant controls over the tagging process;
tracing the tagged data to the consolidated financial statements of the Group presented in human‐
readable format;
evaluating the completeness of the Group’s tagging of the consolidated financial statements;
Annual report
171
Ericsson Nikola Tesla Group
Ericsson Nikola Tesla Group
Consolidated statement of
comprehensive income
for the year ended 31 December 2022
2022
2021
Notes
HRK ‘000
HRK ‘000
2,242,084
2,203,897
Sales revenue
5, 6
(2,058,312)
(1,949,570)
Cost of sales
7
183,772
254,327
Gross profit
(43,195)
(42,455)
Selling expenses
7
(51,861)
(50,290)
Administrative expenses
7
40,104
26,000
Other operating income
7
(333)
(1,158)
Impairment loss on financial assets
128,487
186,424
Operating profit
7,275
Finance income
9
9,566
(3,505)
Finance expense
9
(1,802)
3,770
Finance income/(expense), net
9
7,764
132,257
194,188
Profit before tax
Income tax
10
(13,087)
(16,840)
Profit for the year
119,170
177,348
Other comprehensive income
375
(115)
Currency translation differences
119,545
177,233
Total comprehensive income for the year
90
Earnings per share (HRK)
11
133
Annual report
172
Ericsson Nikola Tesla Group
Ericsson Nikola Tesla Group
Consolidated statement of
financial position
as at 31 December 2022
2022
2021
Assets
Notes
HRK ‘000
HRK ‘000
Non-current assets
Property, plant and equipment
12
121,256
134,198
Right of use assets
28
44,644
52,087
Intangible assets
13
4,854
5,257
Loans and receivables
14
15,768
21,928
Deferred tax assets
10
24,013
15,606
Total non-current assets
210,535
229,076
Current assets
Inventories
15
99,648
142,852
Trade receivables
16
228,220
201,473
Receivables from related parties
29 (c)
134,748
76,808
Other receivables
17
15,650
35,994
Income tax receivables
50
181
Prepayments
8,811
6,787
18
Financial assets at fair value through profit or loss
31,074
32,997
Cash and cash equivalents
19
526,448
477,487
Total current assets
1,044,649
974,579
1,255,184
1,203,655
Total assets
Annual report
173
Ericsson Nikola Tesla Group
Ericsson Nikola Tesla Group
Consolidated statement of financial
position (continued)
as at 31 December 2022
2022
2021
Notes
Equity and liabilities
HRK ‘000
HRK ‘000
Equity
Share capital
20 (a)
133,165
133,165
Treasury shares
20 (b)
(17,090)
(12,421)
Legal reserves
20 (c)
6,658
6,658
Reserve for treasury shares
20 (d)
40,331
36,512
Reserve of currency conversion
(21)
(396)
Retained earnings
272,556
240,524
Total equity
435,599
404,042
Non-current liabilities
Borrowings
21
1,621
17,031
Lease liabilities
28
27,901
33,674
Other non-current liabilities
22
4
446
Employee benefits
23 (a)
8,311
8,597
Total non-current liabilities
37,837
59,748
Current liabilities
Payables to related parties
29 (c)
52,739
12,628
21
Borrowings
14,134
14,134
Trade and other payables
24
319,353
253,501
Income tax payable
4,224
16,806
Provisions
25
15,949
13,601
Accrued charges and deferred revenue
26
166,203
120,483
Contract liabilities
27
192,240
289,976
Lease liabilities
28
16,906
18,736
Total current liabilities
781,748
739,865
Total liabilities
819,585
799,613
Total equity and liabilities
1,255,184
1,203,655
Annual report
174
Ericsson Nikola Tesla Group
Ericsson Nikola Tesla Group
Consolidated statement of
changes in equity
for the year ended 31 December 2022
Share
Treasury
Legal Reserve for Translation
Retained
Total
capital
shares reserves
treasury
reserve
earnings
shares
HRK ‘000
HRK ‘000 HRK ‘000
HRK ‘000
HRK ‘000
HRK ‘000
HRK ‘000
As at 1 January 2021
133,165
(506)
6,658
13,904
(281)
192,934
345,874
Changes in equity for 2021
Total comprehensive income
-
-
-
-
(115)
177,348
177,233
Dividend distribution for 2020,
Note 20 (e)
-
-
-
-
-
(109,162)
(109,162)
Purchase of treasury shares,
Note 20 (b)
-
(14,307)
-
-
-
-
(14,307)
Shares granted, Note 23 (b)
-
2,392
-
(2,392)
-
-
-
Transfer
-
-
-
25,000
-
(25,000)
-
Share-based payments,
Note 23 (b)
-
-
-
-
-
4,404
4,404
Total contributions by and
distributions to owners of the
parent recognized directly in
equity
-
(11,915)
-
22,608
-
(129,758)
(119,065)
As at 31 December 2021
133,165
(12,421)
6,658
36,512
(396)
240,524
404,042
As at 1 January 2022
133,165
(12,421)
6,658
36,512
(396)
240,524
404,042
Changes in equity for 2022
Total comprehensive income
-
-
-
-
375
119,170
119.545
Dividend distribution for 2021,
Note 20 (e)
-
-
-
-
-
(84,649)
(84,649)
Purchase of treasury shares,
Note 20 (b)
-
(10,850)
-
-
-
-
(10,850)
Shares granted, Note 23 (b)
-
6,181
-
(6,181)
-
-
-
Transfer
-
-
-
10,000
-
(10,000)
-
Share-based payments,
Note 23 (b)
-
-
-
-
-
7,511
7,511
Total contributions by and
distributions to owners of the
parent recognized directly in
equity
-
(4,669)
-
3,819
-
(87,138)
(87,988)
As at 31 December 2022
133,165
(17,090)
6,658
40,331
(21)
272,556
435,599
Annual report
175
Ericsson Nikola Tesla Group
Ericsson Nikola Tesla Group
Consolidated statement of
cash flows
for the year ended 31 December 2022
2022
2021
Notes
‘000 kn
‘000 kn
Cash flows from operating activities
Profit before tax
132,257
194,188
Adjustments for:
Depreciation and amortization
7, 12, 13,28
49,183
57,096
Effects of lease derecognition
-
(19)
Impairment losses and reversals
(1,761)
760
Gain on sale of property, plant and equipment
(638)
(68)
Net loss/(gain) on remeasurement of financial assets
1,923
(121)
Amortization of discount
1
52
Interest income
(3,141)
(3,739)
Interest expense
1,870
1,728
Foreign exchange (gain)/losses, net
(649)
(4,806)
Share-based payments
23 (b)
7,511
4,404
Changes in working capital:
In receivables
(49,108)
9,841
In inventories
44,534
(58,162)
In provisions
2,061
(1,903)
In payables
36,901
177,205
Cash generated from operations
220,944
376,456
Interest paid
(1,667)
(1,991)
Income taxes paid
(32,319)
(4,518)
Net cash from operating activities
186,958
369,947
Cash flows from investing activities
Interest received
3,430
2,835
Dividends received
-
59
Proceeds from sale of property, plant and equipment
884
108
Purchases of property, plant and equipment, and intangible assets
(14,805)
(17,544)
Deposits given to financial institutions, net
12,901
(1,236)
Receipt of government grant
-
1,324
Net cash from/(used in) investing activities
2,410
(14,454)
Annual report
176
Ericsson Nikola Tesla Group
Ericsson Nikola Tesla Group
Consolidated statement of cash
flows (continued)
for the year ended 31 December 2022
2022
2021
HRK ‘000
HRK ‘000
Notes
Cash flows from financing activities
21
(26,189)
(14,831)
Repayment of borrowings
20 (b)
(10,850)
(14,307)
Purchase of treasury shares
20 (e)
(84,751)
(109,166)
Dividends paid
Payment of lease liabilities
28
(19,387)
(22,807)
(161,111)
Net cash used in financing activities
(141,177)
Effects of exchange rate changes on cash and cash equivalents
770
2,049
196,431
Net increase/(decrease) in cash and cash equivalents
48,961
281,056
Cash and cash equivalents at the beginning of the year
477,487
477,487
Cash and cash equivalents at the end of the year
19
526,448
Annual report
177
Ericsson Nikola Tesla Group
Notes to the Consolidated Financial Statements of Ericsson Nikola Tesla Group
1 Significant accounting policies
Reporting entity
Ericsson Nikola Tesla d.d. (the Parent Company) is a joint-stock company incorporated and domiciled in Croatia. The
address of its registered office is Krapinska 45, 10000 Zagreb, the Republic of Croatia. The Parent Company’s shares are
listed on the Public Joint Stock Company listing on the Zagreb Stock Exchange. Ericsson Nikola Tesla d.d. has prepared
these consolidated financial statements as at 31 December 2022 and for the year then ended for the Parent Company,
its five active subsidiaries of which two are domiciled in Croatia, one in Bosnia and Herzegovina, one in Kosovo and one
in Belarus (together “the Group”). A summary of the Group’s principal accounting policies is set out below.
Statement of compliance
The consolidated financial statements of the Group have been prepared in accordance with International Financial
Reporting Standards adopted by the European Union (IFRS). These consolidated financial statements also comply with
the Croatian Accounting Act in effect on the date of issue of these consolidated financial statements. These consolidated
financial statements are a translation of the official statutory IFRS consolidated financial statements.
Basis of preparation
The consolidated financial statements are prepared on the historical cost basis, with the exception of financial
instruments which are carried at fair value. These comprise derivative financial instruments and financial assets and
liabilities at fair value through profit or loss. Policies have been consistently applied to all the periods presented, unless
otherwise stated (refer to Note 2).
The preparation of consolidated financial statements in conformity with IFRSs requires management to make
judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and
liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and
various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of
making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognized in the period in which the estimate is revised if the revision affects only that period or in the period of revision
and future periods if the revision affects both current and future periods. Judgements made by executive management
in the application of IFRSs that have significant effect on the consolidated financial statements and estimates are
discussed in Note 4.
Going concern
The executive management have a reasonable expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. The Group therefore continues to adopt the going concern basis in
preparing its consolidated financial statements.
Functional and presentational currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary
economic environment where the entity operates (‘the functional currency’). The consolidated financial statements are
presented in Croatian kuna (HRK), which is the Parent Company’s functional and the Group’s presentation currency and
have been rounded to the nearest thousand.
Annual report
178
Ericsson Nikola Tesla Group
Notes to the Consolidated Financial Statements of Ericsson Nikola Tesla Group (continued)
1 Significant accounting policies
(continued)
Revenue recognition
IFRS 15 “Revenue from Contracts with Customers” is a principle-based model of recognizing revenue from customer
contracts. It has a five-step model that requires revenue to be recognized when control over goods and services are
transferred to the customer.
The following paragraphs describes the types of contracts, when performance obligations are satisfied, and the timing
of revenue recognition. They also describe the normal payment terms associated with such contracts and the resulting
impact on the balance sheet over the duration of the contracts. The vast majority of the Group’s business is for the sale
of standard products and services.
Standard solution
Products and services are classified as standard solutions if they do not require significant installation and integration
services to be delivered. Installation and integration services are generally completed within a short period of time from
the delivery of the related products.
These products and services are viewed as separate distinct performance obligations. This type of customer contract is
usually signed as a frame agreement and the customer issues individual purchase orders to commit to purchases of
products and services over the duration of the agreement.
Revenue for standard products shall be recognized when control over the equipment is transferred to the customer at a
point in time. This assessment shall be viewed from a customer’s perspective considering indicators such as transfer of
titles and risks, customer acceptance, physical possession, and billing rights. Control of an asset therefore refers to the
ability to direct use of and obtain substantially all of the remaining benefits from the asset.
Furthermore, control includes the ability to prevent other entities from using and obtaining the benefits from an asset.
The benefits of an asset are the potential cash flows (inflows or savings in outflows) that can be obtained directly or
indirectly. For hardware sales, transfer of control is usually deemed to occur when the equipment arrives at the customer
site and for software sales, when the licenses are made available to the customer. Software licenses may be provided to
the customer at a point in time, activated or ready to be activated by the customer at a later stage, therefore revenue is
recognized when customer obtains control of the software.
Contractual terms vary, therefore judgment will be applied when assessing the indicators of transfer of control. Revenue
for installation and integration services is recognized upon completion of the service. Costs incurred in delivering
standard products and services are recognized as costs of sales when the related revenue is recognized in the Income
Statement.
Costs incurred relating to performance obligations not yet fully delivered are recognized as inventories.
Transaction prices under these contracts are usually fixed, and mostly billed upon delivery of the hardware or software
and completion of installation services. Customer finance agreements may be agreed separately with some customers
where payment terms exceed 179 days.
Revenue for recurring services such as customer support and managed services is recognized as the services are
delivered, generally pro-rata over time. Costs incurred in delivering recurring services are recognized as cost of sales as
they are incurred. Transaction prices under these contracts are billed over time, often on a quarterly basis.
Contract liabilities or receivables may arise depending on whether the quarterly billing is in advance or in arrears.
Contract for standard products and services applies to business in all segments.
Customized solution
Some products and services are sold together as part of a customized solution to the customer. This type of contract
requires significant installation and integration services to be delivered within the solution, normally over a period of
more than 1 year. These products and services are viewed together as a combined performance obligation. This type of
contract is usually sold as a firm contract in which the scope of the solution and obligations of both parties are clearly
defined for the duration of the contract.
Annual report
179
Ericsson Nikola Tesla Group
Notes to the Consolidated Financial Statements of Ericsson Nikola Tesla Group (continued)
1 Significant accounting policies
(continued)
Revenue recognition (continued)
Customized solution (continued)
Revenue for the combined performance obligation shall be recognized over time if progress of completion can be reliably
measured and enforceable right to payment exists over the duration of the contract. The progress of completion is
estimated by reference to the output delivered such as achievement of contract milestones and customer acceptance.
This method determines revenue milestones over the duration of the contract, and it is considered appropriate as it
reflects the nature of the customized solution and how integration service is delivered in these projects.
If the criteria above are not met, then all revenue shall be recognized upon the completion of the customized solution,
when final acceptance is provided by the customer. Costs incurred in delivering customized solutions are recognized as
costs of sales when the related revenue milestone is recognized in the Income Statement. Costs incurred relating to
future revenue milestones are recognized as Inventories and assessed for recoverability on a regular basis.
Transaction price under these contracts is usually a fixed fee, split into a number of progress payments or billing
milestones as defined in the contract. In most cases, revenue recognized is limited to the progress payments or
unconditional billing milestones over the duration of the contract, therefore no contract asset or contract liability arises
on these contracts. Customer finance agreements may be agreed separately with some customers where payment terms
exceed 365 days. Contract for customized solution applies to the Industry and Society business, Business Support
Systems (BSS) business, within the segment Digital Services, and the Media Solutions business within the segment
Emerging Business and Other.
Right to use (RTU)
The nature of Ericsson’s promise is to provide a right to use Ericsson’s IP as it exists (in terms of form and functionality)
at the point in time at which the license is granted to the customer. This means that the customer can direct the use of,
and obtain substantially all the remaining benefits from, the license at the point in time at which the license transfers.
Customer contract related balances
Trade receivables include amounts that have been billed in accordance with customer contract terms and amounts that
the Group has an unconditional right to, with only passage of time before the amounts can be billed in accordance with
the customer contract terms. Customer finance credits arise from credit terms exceeding 179 days in the customer
contract or a separate financing agreement signed with the customer. Customer finance is a class of financial assets that
is managed separately from receivables. See note 30(d) for further information on credit risk management of trade
receivables and customer finance credits.
In accordance with IFRS 15, where significant financing is provided to the customer, revenue is adjusted to reflect the
impact of the financing transaction. These transactions could arise from the customer finance credits above if the
contracted interest rate is below the market rate or through implied financing transactions due to payment terms of more
than one year from the date of transfer of control.
Contract asset is unbilled sales amount relating to performance obligation that has been satisfied under customer
contract but is conditional on terms other than only the passage of time before payment of the consideration is due.
Under previous standards these unbilled sales balances have been included within trade receivables. Contract liability
relates to amounts that are paid by or due from customers for which performance obligations are unsatisfied or partially
satisfied. Under previous standards these balances have been disclosed as deferred revenue within other current
liabilities, and the Group concluded that the balances meet the definition of contract liability under IFRS 15. Advances
from customers are also included in the contract liability balance.
Annual report
180
Ericsson Nikola Tesla Group
Notes to the Consolidated Financial Statements of Ericsson Nikola Tesla Group (continued)
1 Significant accounting policies
(continued)
Property, plant and equipment
Items of property, plant and equipment are shown at cost or deemed cost, less accumulated depreciation and
impairment losses.
The Group recognizes in the carrying amount of an item of property, plant and equipment the cost of replacing part of
such an item when that cost is incurred if it is probable that the future economic benefits embodied with the item will
flow to the Group and the cost of the item can be measured reliably. All other expenditure on repairs and maintenance
is expensed as incurred. Where parts of an item of property, plant and equipment have different useful lives, they are
accounted for as separate items of property, plant and equipment.
Land is not depreciated. Depreciation on other assets is provided on a straight-line basis to allocate their cost over the
estimated economic useful life of the assets. The estimated useful lives are as follows:
Useful lives
Buildings
5 – 30 years
Plant and equipment
2 – 10 years
Other
5 – 7 years
The depreciation method, useful lives and residual values are reviewed, and adjusted if appropriate, at each balance
sheet date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying
amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing
proceeds with carrying amount and are included in the consolidated statement of comprehensive income.
Intangible assets
Intangible assets are stated on initial recognition at cost and subsequently at cost less accumulated amortization and
impairment losses.
Amortization is provided on a straight-line basis over the estimated useful lives of intangible assets. Intangible assets
include acquired computer software and are amortized on a straight-line basis over their useful life of 2–4 years. Cost
associated with maintaining computer software is recognized as an expense as incurred.
Impairment of non-financial assets
Assets that have an indefinite useful life (such as goodwill) are not subject to amortization and are tested annually for
impairment. Assets that are subject to amortization and depreciation are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized
for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the
higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are
grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial
assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each
reporting date.
Annual report
181
Ericsson Nikola Tesla Group
Notes to the Consolidated Financial Statements of Ericsson Nikola Tesla Group (continued)
1 Significant accounting policies
(continued)
Financial assets at amortized cost
Financial assets are classified as amortized cost if the contractual terms give rise to payments that are solely payments
of principal and interest on the principal amount outstanding and the financial asset is held in a business model whose
objective is to hold financial assets in order to collect contractual cash flows. These assets are subsequently measured
at amortized cost using the effective interest method, minus impairment allowances. Interest income and gains and
losses from financial assets at amortized cost are recognized in financial income.
Financial assets at fair value through profit or loss (FVTPL)
A financial asset is classified as held for trading if it is acquired principally for the purpose of selling in the near term.
Derivatives are classified as held for trading, unless they are designated as hedging instruments for the purpose of hedge
accounting. Assets held for trading are classified as current assets. Debt instruments classified as FVTPL, but not held
for trading, are classified on the balance sheet based on their maturity date (i.e. those with a maturity longer than one
year are classified as non-current). Investments in shares and participations are classified as FVTPL and classified as
non-current financial assets. Gains or losses arising from changes in the fair values of the FVTPL category (excluding
derivatives and customer financing) are presented in the income statement within financial income in the period in which
they arise. Gains and losses on derivatives are presented in the income statement as follows. Gains and losses on
derivatives that hedge foreign exchange risks are presented as net foreign exchange gains and losses. Gains and losses
on customer financing are presented in the income statement as selling expenses. Dividends are recognised as other
income in profit or loss when the right to receive payment is established.
Cash and cash equivalents
Cash comprises cash held at banks and on hand. Cash equivalents include demand deposits and time deposits with
maturities up to three months. Cash and cash equivalents are carried at amortized cost because: (i) they are held for
collection of contractual cash flows and those cash flows represent solely payments of principal and interest, and (ii)
they are not designated at fair value through profit and loss.
Impairment of cash, trade receivables and contract assets
Financial assets affected by the new model are cash and cash equivalents, deposits, trade receivables and contract assets.
Two unified models were developed for relatable financial assets. Cash equivalents and deposits are assessed for
impairment under one unified model and trade receivables and contract assets are assessed for impairment under
another unified model. Cash equivalents and deposits are assessed based on probability of default as well as Group
exposure to certain financial institution at the time of default. To determine probability of default, country credit rating
of financial institution is used, as well as the rating of future outlook is used.
Expected loss on cash, cash equivalents and deposits for each financial institution gives the total expected credit loss.
There were no significant changes to the model during the year. The Group has determined that credit risk largely
depends on both the payment pattern of the customer as well as the risk in the country where the customer resides (e.g.
ability to make cross-border payments).
Annual report
182
Ericsson Nikola Tesla Group
Notes to the Consolidated Financial Statements of Ericsson Nikola Tesla Group (continued)
1 Significant accounting policies
(continued)
Impairment of cash, trade receivables and contract assets (continued)
Therefore, expected credit losses (ECLs) are calculated using a provision matrix that specifies a fixed rate depending
both on the number of days past due and the country risk rating. The country risk ratings depend on the ratings used by
all Export Credit Agencies within the OECD. The rates defined in the provision matrix are based on historical loss patterns
for certain portfolio of customers. Each customer is regulatory monitored and these rates are adjusted for current
conditions as well as management expectations for changes to political risks and payment patterns of certain customer
in the future. There were no significant changes to the model during the year.
Trade and other payables
Trade and other payables are initially recognized at fair value and subsequently measured at amortized cost using the
effective interest rate.
Financial liabilities
Financial liabilities are recognized when the Group becomes bound to the contractual obligations of the instrument.
Financial liabilities are derecognized when they are extinguished, i.e. when the obligation specified in the contract is
discharged, cancelled or expires.
Inventories
Inventories are stated at the lower of cost and net realizable value. Net realizable value is the estimated selling price in
the ordinary course of business, less the estimated costs of completion and selling expenses. The cost of other inventories
is based on the First In First Out (FIFO) principle and includes expenditures incurred in acquiring the inventories and
bringing them to their existing location and condition. In case of manufactured inventories, the cost includes materials,
labor and related overhead, and expenditure incurred in acquiring the inventories and bringing them to their existing
location and condition. Slow-moving and obsolete inventories have been written down to their estimated realizable
value.
Share capital
Share capital is stated in Croatian kuna at nominal value.
Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction,
net of tax, from the proceeds. Where the Parent Company purchases its own equity share capital (treasury shares), the
consideration paid, including any directly attributable incremental costs (net of income taxes), is deducted from equity
attributable to the equity holders until the shares are cancelled or reissued. Where such ordinary shares are subsequently
reissued, any consideration received, net of any directly attributable incremental transaction costs and the related
income tax effects, is included in equity attributable to the equity holders.
Income tax
The tax expense for the period is based on taxable profit for the year and comprises current and deferred tax. Income
tax is recognized in the consolidated statement of comprehensive income except to the extent that it relates to items
recognized directly in equity, in which case it is recognized in equity. The current income tax charge is calculated on the
basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Parent
Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken
in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes
provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Annual report
183
Ericsson Nikola Tesla Group
Notes to the Consolidated Financial Statements of Ericsson Nikola Tesla Group (continued)
1 Significant accounting policies
(continued)
Income tax (continued)
Deferred income tax is recognized by using the balance sheet liability method on temporary differences arising between
tax basis of assets and liabilities and their carrying amount in the financial statements. However, the deferred income
tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business
combination that at the time of the transaction does not affect either accounting or taxable profit or loss. Deferred tax
assets and liabilities are not discounted and are classified as non-current assets and/or liabilities in the balance sheet.
Deferred tax assets are recognized when it is probable that sufficient taxable profits will be available against which the
deferred tax assets can be utilized. At each balance sheet date, the Group reassesses unrecognized deferred tax assets
and the carrying amount of deferred tax assets. Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income
tax purposes. Deferred tax assets and liabilities are measured by using the tax rates expected to apply to taxable profit
in the years in which those temporary differences are expected to be recovered or settled based on tax rates enacted or
substantially enacted at the balance sheet date.
The measurement of deferred tax liabilities and deferred tax assets reflects the tax consequences that would follow from
the manner in which the enterprise expects, at the balance sheet date, to recover or settle the carrying amount of its
assets and liabilities.
Foreign currencies
Transactions denominated in foreign currencies are translated into functional currency at the rate prevailing at the date
of the transaction. Monetary assets and liabilities denominated in foreign currency at the balance sheet date have been
translated to functional currency at the foreign exchange rate ruling at that date. Foreign exchange differences arising
from translation are included in the consolidated statement of comprehensive income. Non-monetary assets and
liabilities denominated in foreign currencies that are stated at fair value are translated to functional currency at foreign
exchange rates ruling at the dates the values were determined. Non-monetary assets and items that are measured in
terms of “historical cost of a foreign currency” are not retranslated.
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary
economic environment where the entity operates (‘the functional currency’). The consolidated financial statements are
presented in Croatian kuna (HRK), which is the Parent Company’s functional and the Group’s presentation currency.
The results and financial position of all the Group’s entities with a functional currency different from the presentation
currency are translated into the presentation currency as follows:
(i)
assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that
balance sheet;
(ii)
income and expenses for each income statement are translated at average exchange rates; and
(iii)
all resulting exchange differences are recognized in other comprehensive income.
On consolidation, exchange differences arising from the translation of the net investment in foreign operations are taken
into other comprehensive income. When a foreign operation is sold, exchange differences that were recorded in equity
are reclassified from other comprehensive income to the income statement as part of the gain or loss on sale.
Annual report
184
Ericsson Nikola Tesla Group
Notes to the Consolidated Financial Statements of Ericsson Nikola Tesla Group (continued)
1 Significant accounting policies
(continued)
Employee benefits
a) Long-term service benefits
The Group provides employees with jubilee and one-off retirement awards. The obligation and costs of these benefits
are determined by using the Projected Unit Credit Method. The Projected Unit Credit Method considers each period of
service as giving rise to an additional unit of benefit entitlement and measures each unit separately to build up the final
obligation. The obligation is measured at the present value of estimated future cash flows using a discount rate that is
similar to the interest rate on government bonds where the currency and terms of the government bonds are consistent
with the currency and estimated terms of the benefit obligation.
b) Share-based payments
The Group operates an equity-settled, share-based compensation plan allowing the employees to receive shares
according to internal policy. The fair value of the employee services received in exchange for the grant of the shares is
recognized as an expense with a corresponding increase in equity. The fair value is measured at grant date and spread
over the period during which the employees become unconditionally entitled to the shares. The total amount to be
expensed over the vesting period is determined by reference to the fair value of the shares granted. At each balance
sheet date, the Parent Company revises its estimates of the number of shares that are expected to become granted. It
recognizes the impact of the revision of original estimates, if any, in the consolidated statement of comprehensive
income, with a corresponding adjustment to equity. When distributed upon vesting date, treasury shares are credited at
average purchase cost and recorded against retained earnings.
c)
Bonus plans
The Group recognizes a liability and an expense for bonuses as a provision where contractually obliged or where there
is past practice that has created a constructive obligation.
Provisions
A provision is recognized when the Group has a present obligation (legal or constructive) as a result of a past event and
it is probable (i.e. more likely than not) that an outflow of resources embodying economic benefits will be required to
settle the obligation, and a reliable estimate can be made of the amount of the obligation. Provisions are reviewed at
each balance sheet date and adjusted to reflect the current best estimate. The most significant provisions in the
consolidated financial statements are provisions for warranty claims, penalty claims and litigation. If the effect is
material and if the obligation is expected to be settled in a period of over 12 months, provisions are determined by
discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value
of money and, where appropriate, the risks specific to the liability. A provision for warranties is recognized when the
underlying products or services are sold. The provision is based on historical warranty data and a weighting of all possible
outcomes against their associated probabilities. The increase in the provision due to passage of time is recognized as
interest expense.
Interest income
Interest income is recognized using the effective interest method. When a loan and receivable is impaired, the Group
reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original
effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on
impaired loan and receivables is recognized using the original effective interest rate.
Annual report
185
Ericsson Nikola Tesla Group
Notes to the Consolidated Financial Statements of Ericsson Nikola Tesla Group (continued)
1 Significant accounting policies
(continued)
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing
performance of the operating segments, has been identified as the Management Board that makes strategic decisions.
Borrowings
Borrowings are initially recognized at fair value, net of transaction costs incurred. Borrowings are subsequently stated
at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized
in the consolidated statement of comprehensive income over the period of the borrowings using the effective interest
method. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement
of the liability for at least 12 months after the balance sheet date.
Government grants
Grants from the government are recognized within “Other operating income” at their fair value where there is reasonable
assurance that the grant will be received, and the Group will comply with all attached conditions.
Government grants relating to costs are deferred and recognized over the period necessary to match them with the costs
that they are intended to compensate.
Grants relating to property, plant and equipment are recognized in profit or loss over the periods and in the proportions
in which depreciation on those assets is recognized. In statement of financial position, government grant is deducted in
arriving at the carrying amount of the underlying asset and is recognized in the profit or loss over the useful life of
depreciable asset by way of a reduced depreciation charge.
Dividend distribution
Dividend distribution to the shareholders is recognized as a liability in the consolidated financial statements in the period
in which the dividends are approved by the shareholders.
Consolidation and goodwill
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity
when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability
to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which
control is transferred to the Group and are de-consolidated from the date that control ceases.
The Group applies the acquisition method to account for business combinations. The consideration transferred for the
acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred and the equity interests issued
by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent
consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and
liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the
acquisition date. On an acquisition-by-acquisition basis, the Group recognizes any non-controlling interest in the
acquiree either at fair value or at the non-controlling interest’s proportionate share of the recognized amounts of
identifiable acquiree’s net assets.
Goodwill is initially measured as excess of the aggregate of the consideration transferred and the fair value of non-
controlling interest in the acquiree and acquisition-date fair value of any previous equity interest in the acquiree over the
fair value of the Group’s share of the identifiable net assets acquired. If this is lower than the fair value of the net assets
of the subsidiary acquired in the case of a bargain purchase, the difference is recognized directly in the consolidated
statement of comprehensive income.
Intercompany transactions, balances and unrealized gains on transactions between Group companies are eliminated.
Unrealized losses are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure
consistency with the policies adopted by the Group.
Annual report
186
Ericsson Nikola Tesla Group
Notes to the Consolidated Financial Statements of Ericsson Nikola Tesla Group (continued)
1 Significant accounting policies
(continued)
Leases
As a lessee
As a lessee, the Group leases property and vehicles. Under IFRS 16, the Group recognizes right
‑of‑use assets and lease
liabilities for most of these leases – i.e. these leases are on balance sheet.
‑
At commencement or on modification of a contract that contains a lease component, the Group allocates the
consideration in the contract to each lease component based on its relative stand alone price.
‑
However, for leases of property the Group has elected not to separate non lease components and account for the lease
‑
and associated non lease components as a single lease component.
‑
The Group uses a number of practical expedients when applying IFRS 16 to leases. In particular, the Group:
-
does not recognize right-of-use assets and liabilities for leases for which the lease term ends within 12 months
of the date of initial application;
-
does not recognize right-of-use assets and liabilities for leases of low value assets; and
-
excludes initial direct costs from the measurement of the right-of-use asset at the date of initial application.
When measuring lease liabilities for leases that were classified as operating leases, the Group discounted lease
payments using its incremental borrowing rate, the weighted average rate applied is 2.5%.
As a lessor
The Group leases out its own property and the Group has classified these leases as operating leases.
The Group sub-leases some of its properties. Under IFRS 16, the right-of-use assets recognized from the head leases are
presented in investment property and measured at fair value at that date. The Group assessed the classification of the
sub-lease contracts with reference to the right-of-use asset rather than the underlying asset and concluded that they
are operating leases under IFRS 16.
The Group has applied IFRS 15 Revenue from Contracts with Customers to allocate consideration in the contract to each
lease and non-lease component.
Annual report
187
Ericsson Nikola Tesla Group
Notes to the Consolidated Financial Statements of Ericsson Nikola Tesla Group (continued)
2 Changes in accounting policies
There were no changes in accounting policies for the financial year ending as at 31 December 2022 in comparison with
prior reporting period.
3 New accounting standards and
interpretations
New standards and amendments to existing not yet adopted
A number of new standards are effective for annual periods beginning after 1 January 2022 and earlier application is
permitted; however, the Group has not early adopted the new or amended standards in preparing these financial
statements.
Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12)
The amendments narrow the scope of the initial recognition exemption to exclude transactions that give rise to equal
and offsetting temporary differences - e.g. leases. The amendments apply for annual reporting periods beginning on or
after 1 January 2023. For leases, the associated deferred tax asset and liabilities will need to be recognised from the
beginning of the earliest comparative period presented, with any cumulative effect recognised as an adjustment to
retained earnings or other components of equity at that date. For all other transactions, the amendments apply to
transactions that occur after the beginning of the earliest period presented.
The Group is currently evaluating the effects of these amendments, but does not expect that the amendment will have
an effect on the Group's retained earnings.
Annual report
188
Ericsson Nikola Tesla Group
Notes to the Consolidated Financial Statements of Ericsson Nikola Tesla Group (continued)
4 Critical accounting estimates and
judgements
Accounting estimates and judgements are continually evaluated and are based on historical experience and other
factors, including expectations of future events that are believed to be reasonable under the circumstances. The Group
makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom
equal the related actual results. The estimates and assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
(a) Impairment losses on loans and receivables
The Group reviews its receivables to assess impairment on a monthly basis. In determining whether an impairment loss
should be recorded in the consolidated statement of comprehensive income, the Group makes judgements as to whether
there is any observable data indicating that there is a measurable decrease in the estimated future cash flows from a
portfolio of loans and receivables before the decrease can be identified with an individual loan or receivable in that
portfolio. This evidence may include observable data indicating that there has been an adverse change in the payment
status of borrowers in a group, or national or local economic conditions that correlate with parameters relevant to assets
in the Group.
(b) Derecognition of receivables with off-balance sheet financing
In 2016, the Group entered into several new customer contracts in the foreign market. The contracts include delivery of
equipment and sale of services with 15% up-front payment while remaining 85% have deferred payment terms up to 54
months.
The Group financed the sale of equipment through a Supplier credit arrangement.
The arrangement includes: (i) matching cash receipts from customer with payments to the bank, (ii) assignation of
insurance policy to the bank, and (iii) ceding future cash receipts from the customer to the bank through special purpose
accounts secured by special purpose deposits (Note 14).
By transferring to the bank its contractual right to receive the cash flows, the Group transferred the financial asset to the
bank. In terms of derecognition criteria, the Group analyzed transfer of risk and rewards of the receivable, specifically
related to credit risk and late payment risk.
The Credit risk is shifted from international customer to the risk from domestic insurance company default, which is
considered as significant transfer in credit risk. The Group issued guarantees to the financing bank for risk of non-
performance by the insurance company which is disclosed in Note 22. The issued guarantee for non-performance of the
insurance company is recognized initially at fair value and subsequently at the higher of the unamortized balance of the
initial fair value and the best estimate of expenditure required to settle the obligation under the guarantee.
Late payment risk was transferred based on the fact that the special purpose deposit covers the late payment charges
and/or history of payments with the customer do not historically evidence late payment risk as substantial to the
agreement.
Having transferred the right to cash flows and substantially all the risk and rewards relating to 90% of receivables, the
management concluded that it was appropriate to derecognize 90% of the related receivables from the balance sheet.
The remaining 10% of the receivables remain on the balance sheet as long-term receivables from the customer (Note
14) and a 10% of the related financing liability to the bank is recorded as borrowings (Note 21).
Annual report
189
Ericsson Nikola Tesla Group
Notes to the Consolidated Financial Statements of Ericsson Nikola Tesla Group (continued)
4 Critical accounting estimates and
judgements (continued)
c) Revenue recognition
The Group uses estimates and judgments in determining the amount and timing of revenue under IFRS 15, particularly
when determining the transaction price and its allocation to performance obligations identified under the contract.
Transaction price may consist of variable elements such as discounts and contract penalties. Transaction price, including
variable considerations, is estimated at the commencement of the contract (and periodically thereafter). Judgment is
used in the estimation process based on historical experience with the type of business and customer.
IFRS 15 also requires revenue to be allocated to each performance obligations by reference to their stand-alone selling
prices. The Group considers that an adjusted market assessment approach should be used to estimate stand-alone
selling prices for its products and services for the purposes of allocating transaction price. These estimates are comprised
of prices set for similar customer and circumstances, adjusted to reflect appropriate profit margins for the market.
Estimates are used to determine discounts that relate specifically to each performance obligations, thus impacting their
stand-alone selling prices.
The management applies judgment when assessing the customer’s ability and intention to pay in a contract. The
assessment is based on the latest customer credit standing and the customer’s past payment history. This assessment
may change during the contract execution, and if there is evidence of deterioration in the customer’s ability or intention
to pay, then under IFRS 15 no further revenue shall be recognized until the collectability criteria is met. Conversely, this
assessment may also change favorably over time, upon which revenue shall now be recognized on a contract that did
not initially meet the collectability criteria.
Revenue for standard products shall be recognized when control over the equipment is transferred to the customer at a
point in time. This assessment shall be viewed from a customer’s perspective considering indicators such as transfer of
titles and risks, customer acceptance, physical possession, and billing rights.
Control of an asset therefore refers to the ability to direct use of and obtain substantially all the remaining benefits from
the asset. Control includes the ability to prevent other entities from using and obtaining the benefits from an asset. The
benefits of an asset are the potential cash flows (inflows or savings in outflows) that can be obtained directly or
indirectly.
Judgment may be applied in determining whether risk and rewards have been transferred to the customer and whether
the customer has accepted the products. In a sale of software license, judgment may also be applied to determine when
the software is made available to the customer by considering when they can direct the use of, and obtain substantially
all the benefits of, the license. Often all indicators of transfer of control are assessed together and an overall judgment
formed as to when transfer of control has occurred in a customer contract.
Revenue for customized solutions shall be recognized over time if progress of completion can be reliably measured and
enforceable right to payment exists over the duration of the contract. The progress of completion is estimated by
reference to the output delivered such as achievement of contract milestones and customer acceptance. Judgments are
applied when determining the appropriate revenue milestones that best reflect the progress of completion and are
aligned with key acceptance stages within the contract.
Annual report
190
Ericsson Nikola Tesla Group
Notes to the Consolidated Financial Statements of Ericsson Nikola Tesla Group (continued)
5 Sales revenue
Analysis of revenue by category:
2022
2021
HRK ‘000
HRK ‘000
HRK ‘000
HRK ‘000
HRK ‘000
HRK ‘000
At a point in
Over time
At a point in Over time
time
time
Sales revenue from products
368,210
345,054
23,156
376,017
318,982
57,035
Sales revenue from services
1,873,874
1,686,025
187,849 1,827,880
1,519,241
308,639
2,242,084
2,031,079
211,005
2,203,897
1,838,223
365,674
6 Segment reporting
The Group has determined the operating segments based on the reports reviewed by the Management Board that are
used to make strategic decisions. The Management Board assesses the performance of the operating segments based
on a measure of adjusted Operating profit. The measurement basis excludes the effects of administration expenses.
When determining the operating segments, the Group has looked at which market and to what type of customers the
Group’s products are aimed, and through what distribution channels they are sold, as well as to commonality regarding
technology, research and development.
To best reflect the business focus and to facilitate comparability with the Ericsson Group, four operating segments are
reported:
–
Networks include radio and transport solutions with supporting services, based on industry standards and offered
via scalable modular platforms. The portfolio enables customers to evolve their telecom networks across generations
to 5G.
Digital Services include products and services providing solutions for our Telecom and Industry & Society customers’
–
digital transformation journeys across the support systems BSS and OSS, Telecom Core, and IT Cloud domains
through a combination of products, technology and expertise in networks, software, cloud, and business processes.
Managed Services are offered in three main areas: Networks, IT, and Network Design & Optimization.
–
Other includes products and services that enable content owners, broadcasters, TV service providers and network
–
operators to efficiently deliver, manage and monetize new TV experiences. In addition, segment Other includes
iconectiv and emerging business such as Internet of Things and Unified Delivery Network (UDN).
The Management Board does not monitor assets and liabilities by segments and therefore this information is not
disclosed.
Annual report
191
Ericsson Nikola Tesla Group
Notes to the Consolidated Financial Statements of Ericsson Nikola Tesla Group (continued)
6 Segment reporting (continued)
Revenues determined based on the geographic location of customers are disclosed in this note. The Group’s assets are
located in Croatia, Bosnia and Herzegovina, Belarus and Kosovo.
2022
2021
HRK ‘000
HRK ‘000
HRK ‘000
HRK ‘000
HRK ‘000
HRK ‘000
At a point in
At a point in
Over time
Over time
time
time
Sales revenue in
domestic market
970,679
833,440
137,239
1,051,212
748,133
303,079
Sales revenue in CIS
countries
104,282
73,645
30,637
121,100
97,831
23,269
Sales revenue to Ericsson
1,024,142
1,024,142
-
899,522
899,522
-
Sales revenue in Bosnia
and Herzegovina,
Montenegro and Kosovo
130,645
92,214
38,431
108,968
72,785
36,183
Other export sales
revenue
12,336
7,638
4,698
23,095
19,952
3,143
2,242,084
2,031,079
211,005
2,203,897
1,838,223
365,674
Networks
Digital services
Managed services
Other
Unallocated
Total
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
HRK ‘000 HRK ‘000 HRK ‘000 HRK ‘000 HRK ‘000 HRK ‘000 HRK ‘000 HRK ‘000 HRK ‘000 HRK ‘000 HRK ‘000 HRK ‘000
Sales revenue
1,036,961 957,335 646,038 582,007
555,783 658,841
3,302
5,714
-
-2,282,084 2,203,897
Timing of revenue
recognition:
At a point in time
943,879 837,724 564,239 518,112
519,659 476,673
3,302
5,714
-
-2,031,079 1,838,223
Over time
93,082 119,611
63,895
182,168
-
-
-
- 211,005 365,674
81,640
36,283
Operating profit
122,901 99,615 10,343 61,774
46.942 74.872
162
453 (51,861) (50,290) 128,487 186,424
Finance income/
(expense), net
3,770 7,764
Profit before tax
132,257 194,188
Income tax
(13,087) (16,840)
Profit for the year
119,170
177,348
Annual report
192
Ericsson Nikola Tesla Group
Notes to the Consolidated Financial Statements of Ericsson Nikola Tesla Group (continued)
7 Expenses by nature
Cost of sales, selling expenses and administrative expenses consist of the following expenses by nature:
2022
2021
HRK ‘000
HRK ‘000
Changes in contract work in progress (Note 15)
57,571
(39,371)
Material and external services (1)
946,309
1,008,483
Personnel expenses (Note 8)
1,100,305
1,014,203
Depreciation and amortization (Notes 12, 13, 28)
49,183
57,096
Value adjustments
-
1,904
2,153,368
2,042,315
(1) Including fees to auditors of HRK 689 thousand (2021: HRK 602 thousand). Fees to auditors mainly relate to statutory
audit services.
Other operating income
Other operating income consists of rent income in total amount of HRK 30,596 thousand (2021: HRK 15,336 thousand)
and other in total amount of HRK 9,508 thousand (2021: HRK 10,664 thousand).
8 Personnel expenses
2022
2021
HRK ‘000
HRK ‘000
Net salaries
624,605
580,745
Taxes and contributions
386,383
366,779
Other payroll-related costs
81,806
62,275
Equity-settled transactions (Note 23 (b))
7,511
4,404
1,100,305
1,014,203
Personnel expenses include HRK 167,923 thousand (2021: HRK 158,659 thousand) of defined pension contributions
paid or payable into obligatory pension plans. Contributions are calculated as a percentage of employees’ gross salaries
(Gross I).
Other payroll-related costs mainly relate to termination benefits in the amount of HRK 1,695 thousand (2021: HRK 5,471
thousand), and to transportation expenses and vacation accrual cost.
As at 31 December 2022, the total number of employees was 3,541 (2021: 3,471).
Annual report
193
Ericsson Nikola Tesla Group
Notes to the Consolidated Financial Statements of Ericsson Nikola Tesla Group (continued)
9 Finance income/(expense), net
2022
2021
HRK ‘000
HRK ‘000
Interest income
3,141
3,739
Net foreign exchange gain
4,134
5,706
Net change in fair value of financial assets at fair value through profit and loss
-
121
Finance income
7,275
9,566
Interest expense
(1,581)
(1,751)
Net change in fair value of financial assets at fair value through profit and loss
(1,923)
-
Amortisation of discount
(1)
(51)
Finance expense
(3,505)
(1,802)
Finance income/(expense), net
3,770
7,764
10 Income tax expense
Income tax has been calculated on the taxable income at statutory tax rates applicable to profits in the respective
countries. Income tax expense recognized in the consolidated statement of comprehensive income comprises:
2022
2021
HRK ‘000
HRK ‘000
Current income tax expense
(21,494)
(22,905)
8,407
6,065
Total deferred tax income/(expense)
(13,087)
(16,840)
Total income tax expense
Deferred tax from tax losses
As at 31 December the Group did not recognize deferred income tax assets of HRK 313 thousand (2021: HRK 100
thousand) in respect of cumulative tax losses amounting to HRK 1.757 thousand (2021: HRK 553 thousand) that can be
carried forward against future taxable income.
Annual report
194
Ericsson Nikola Tesla Group
Notes to the Consolidated Financial Statements of Ericsson Nikola Tesla Group (continued)
10 Income tax expense (continued)
Deferred tax from tax losses (continued)
A tax loss may be carried forward for five years subsequent to the year in which it was incurred. The availability of tax
losses against future periods, subject to review by the Ministry of Finance, is as follows:
2022
2021
HRK ‘000
HRK ‘000
Tax loss for 2021 – expires 31 December 2026
553
553
Tax loss for 2022 – expires 31 December 2027
1,204
-
1,757
553
Effective tax rate reconciliation
The tax on the profit before tax differs from the theoretical amount that would arise using the weighted average tax rate
applicable to profits of the consolidated entities as follows:
2022
2021
HRK ‘000
HRK ‘000
Profit before tax
132,257
194,188
Tax calculated at domestic tax rates applicable to profits in the respective
countries
34,055
34,609
Tax effects of:
Permanent non-deductible expenses
(5,565)
128
Effects of temporary differences
31
(227)
Tax incentives
(15,434)
(17,670)
Tax charge
13,087
16,840
Effective tax rate
9.9%
8.7%
Tax incentives totaling HRK 15,434 thousand (2021: HRK 17,670 thousand) include tax allowances for certain
expenditure, as employment and education and training, as defined by Croatian tax legislation. The underlying
expenditure is included in cost of sales.
The Croatian Income Tax Act is subject to different interpretations and changes in respect of certain expenses which
reduce the tax base. The Management Board’s interpretation of the law relating to these transactions and activities of
the Group may be disputed by the relevant authorities. The Tax Authority may take a different view in interpreting the
laws and judgments, and it is possible that those transactions and activities that have not been disputed in the past may
be disputed now. The Tax Authority may carry out a tax audit within three years from the year in which the income tax
liability for a certain financial period was established.
Annual report
195
Ericsson Nikola Tesla Group
Notes to the Consolidated Financial Statements of Ericsson Nikola Tesla Group (continued)
10 Income tax expense (continued)
Deferred tax from other temporary differences
The Group recognized deferred tax assets in the amount of HRK 24,013 thousand (2021: HRK 15,606 thousand) relating
to temporary differences arising from:
Accrued interest expenses
–
–
Impairment of receivables
Accrued expenses from contracts
–
Warranty provisions
–
Provisions for jubilee awards and retirement
–
Right of use asset and lease liabilities
–
Impairments, provisions and accrued expenses
HRK ‘000
As at 1 January 2021
9,541
Tax credited to the Income statement
7,202
Tax charged to the Income statement
(1,137)
As at 31 December 2021
15,606
As at 1 January 2022
15,606
Tax credited to the Income statement
11,230
Tax charged to the Income statement
(2,823)
As at 31 December 2022
24,013
11 Earnings per share
2022
2021
Profit for the year (HRK ‘000)
119,170
177,348
Weighted Average Number of Shares Outstanding at the year-end
1,323,376
1,330,723
Earnings per share (HRK)
90
133
Basic and fully diluted earnings per share are the same since the Parent Company does not have any dilutive potential
ordinary shares.
Annual report
196
Ericsson Nikola Tesla Group
Notes to the Consolidated Financial Statements of Ericsson Nikola Tesla Group (continued)
12 Property, plant and equipment
Asset under
Land and
Plant and
Other
Total
construction
buildings
equipment
HRK ‘000
HRK ‘000
HRK ‘000
HRK ‘000
HRK ‘000
As at 1 January 2021
Cost or valuation
177,231
359,598
32,415
328
569,572
Accumulated depreciation
(129,549)
(285,946)
(275)
(415,770)
-
Net book amount
47,682
73,652
32,415
53
153,802
Year ended 31 December 2021
Opening net book amount
47,682
73,652
32,415
53
153,802
Transfer of asset under construction
30,667
1,482
(32,149)
-
-
Additions
1,078
15,427
513
-
17,018
Disposals
-
(292)
-
-
(292)
Depreciation charge
(4,219)
(32,103)
-
(8)
(36,330)
Closing net book amount
75,208
58,166
779
45
134,198
As at 31 December 2021
Cost or valuation
208,977
274,190
588
328
484,083
(133,769)
Accumulated depreciation
(215,833)
-
(283)
(349,885)
Net book amount
75,208
58,357
588
45
134,198
Year ended 31 December 2022
Opening net book amount
75,208
58,357
588
45
134,198
Transfer of asset under construction
25
185
(210)
-
-
Additions
280
14,350
1,687
-
16,317
Disposals
-
(101)
-
(13)
(114)
Depreciation charge
(4,488)
(24,650)
-
(7)
(29,145)
Closing net book amount
71,025
48,141
2,065
25
121,256
As at 31 December 2022
Cost or valuation
209,031
235,536
2,065
135
446,767
Accumulated depreciation
(138,006)
(187,395)
-
(110)
(325,511)
Net book amount
71,025
48,141
2,065
25
121,256
As at 31 December 2022, the Group had contracts totaling HRK 360 thousand (2021: HRK 698 thousand) related to
future equipment purchases.
Asset under construction mostly relates to building energy reconstruction in Krapinska 45, Zagreb.
The Group acts as a lessor under operating leases, mainly in respect of land and buildings. Property leased to others with
a carrying value of HRK 3,980 thousand (2021: HRK 4,752 thousand) is included within land and buildings. These assets
are depreciated at the same depreciation rates as other buildings. Subsequent renewals are negotiated with the lessee.
No contingent rents are charged. Portions of the property which is held for rental could not be sold separately or leased
out separately under finance lease. Consequently, the IAS 40 criteria for separate investment property recognition are
not met.
Annual report
197
Ericsson Nikola Tesla Group
Notes to the Consolidated Financial Statements of Ericsson Nikola Tesla Group (continued)
13 Intangible assets
Application
Goodwill (i)
Total
software
HRK ‘000
HRK ‘000
HRK ‘000
As at 1 January 2021
Cost or valuation
5,404
4,173
9,577
Accumulated amortization
(5,055)
-
(5,055)
Net book amount
349
4,173
4,522
Year ended 31 December 2021
Opening net book amount
349
4,173
4,522
Additions
859
-
859
Amortization charge
(124)
-
(124)
Closing net book amount
1,084
4,173
5,257
As at 31 December 2021
Cost or valuation
6,263
4,173
10,436
Accumulated amortization
(5,179)
-
(5,179)
Net book amount
1,084
4,173
5,257
Year ended 31 December 2022
Opening net book amount
1,084
4,173
5,257
Additions
6
-
6
Amortization charge
(409)
-
(409)
Closing net book amount
681
4,173
4,854
As at 31 December 2022
Cost or valuation
6,185
4,173
10,358
Accumulated amortization
(5,504)
-
(5,504)
Net book amount
681
4,173
4,854
(i) In September 2014, the Group signed business unit transfer agreements by which the Group acquired a business from
Hrvatski Telekom d.d. The agreements included transfer of 641 employees, supplier contracts, organizational structure,
activities and operational processes. The business comprises acquired assets and assumed liabilities to employees.
Goodwill is tested annually for impairment as stated in Note 1.
The recoverable amount of cash generating units is determined based on value-in-use calculations. These calculations
use cash flow projections from financial budgets approved by the management covering a five-year period. The present
value of future cash flows is calculated using a discount rate of 10.38%, based on the Group's weighted average cost of
capital.
Annual report
198
Ericsson Nikola Tesla Group
Notes to the Consolidated Financial Statements of Ericsson Nikola Tesla Group (continued)
14 Loans and receivables
2022
2021
HRK ‘000
HRK ‘000
Deposits with financial institutions, denominated in foreign currency
6,594
7,295
5,200
Deposits with financial institutions, denominated in HRK
9,200
Non-current receivables from foreign customers, denominated in foreign currency
-
77
Loans given, Note 4 (b)
3,719
5,004
Receivables for sold apartments
359
369
15,872
Total loans and receivables
21,945
Impairment allowance on loans and receivables
(104)
(17)
15,768
21,928
Deposits with financial institutions in the amount of HRK 10,714 thousand (2021: 14,701 thousand) are used as a
collateral for Supplier credit arrangement and performance guarantees disclosed in Note 4 (b), with interest rate from
0% to 0.45% and maturing in year 2026.
The rest of the deposits with financial institutions of HRK 1,080 thousand (2021: HRK 1,794 thousand) are placed as
guarantee deposits for housing loans provided to the employees with a remaining maturity of over three years.
Loans and receivables from customers are partially secured with bank guarantees and letters of credit. The current
portion of the non-current receivables is classified under current assets.
Receivables for sold apartments are linked to the counter value of euro, repayments are made by deduction from monthly
salary and the loans are secured with collateral on the house or apartment. Receivables for sold apartments and housing
loans provided to a limited number of employees bear fixed interest rates of up to 5% per annum.
Non-current portion of foreign and domestic loans and receivables from customers
2022
2021
Due
HRK ‘000
HRK ‘000
2023
-
4,459
2024
2,572
622
2025
967
-
3.719
5,081
Annual report
199
Ericsson Nikola Tesla Group
Notes to the Consolidated Financial Statements of Ericsson Nikola Tesla Group (continued)
15 Inventories
2022
2021
HRK ‘000
HRK ‘000
Raw materials
53,496
39,151
Contract work in progress
46,152
103,701
99,648
142,852
Slow-moving or obsolete inventories have been written down to their estimated realizable value through an impairment
allowance. The impairment allowance is included within cost of sales in the consolidated statement of comprehensive
income in total amount of HRK 1,329 thousand (2021: HRK 1,927 thousand).
16 Trade receivables
2022
2021
HRK ‘000
HRK ‘000
Foreign trade receivables
42,761
80,509
Current portion of non-current foreign receivables
-
20,367
Total current foreign receivables
42,761
100,876
Domestic trade receivables
186,487
106,906
Total current domestic receivables
186,487
106,906
Impairment allowance on receivables
(1,028)
(6,309)
228,220
201,473
.
Annual report
200
Ericsson Nikola Tesla Group
Notes to the Consolidated Financial Statements of Ericsson Nikola Tesla Group (continued)
16 Trade receivables (continued)
Movements in impairment allowance on loans and receivables were as follows:
2022
2021
HRK ‘000
HRK ‘000
As at 1 January
7,677
9,914
Impact of discounting non-current receivables
101
(269)
Receivables written off during the year as uncollectible
(1,347)
(1,304)
Impairment on receivables
(3,791)
(664)
As at 31 December (1)
2,640
7,677
(1) Including impairment provision for receivables from related parties of 1,508 thousand (2021: HRK 1,328 thousand).
17 Other receivables
2022
2021
HRK ‘000
HRK ‘000
Advances given
2,014
18,785
Deposits
5,800
13,328
Net VAT receivables
1,210
2,564
Receivables for existing customer financing agreements (note 4b)
4,885
-
Other receivables
1,741
1,317
15,650
35,994
Annual report
201
Ericsson Nikola Tesla Group
Notes to the Consolidated Financial Statements of Ericsson Nikola Tesla Group (continued)
18Financial assets at fair value
through profit or loss
2022
2021
HRK ‘000
HRK ‘000
Financial assets at fair value through profit or loss
- Equity securities
312
1,544
- Investment in open-ended investment funds
30,762
31,453
31,074
32,997
19Cash and cash equivalents
2022
2021
HRK ‘000
HRK ‘000
Cash and demand deposits
528,029
479,650
Impairment loss (Note 30(d))
(1,581)
(2,163)
526,448
477,487
Annual report
202
Ericsson Nikola Tesla Group
Notes to the Consolidated Financial Statements of Ericsson Nikola Tesla Group (continued)
20 Equity
(a) Share capital
As at 31 December 2022, the share capital is represented by 1,331,650 (2021: 1,331,650) of authorized, issued and fully
paid ordinary shares, with a total registered value of HRK 133,165 thousand (2021: HRK 133,165 thousand). The
nominal value of one share is HRK 100 (2021: HRK 100). Holders of the ordinary shares are entitled to receive dividends
as declared at the Annual General Meeting and are entitled to one vote per share at the Annual General Meeting.
The shareholders as at 31 December are:
Number of
% held
Number of
% held
shares
shares
2022
2021
Telefonaktiebolaget LM Ericsson
653,473
49.07
653,473
49.07
Other shareholders
668,166
50.18
671,226
50.41
Treasury shares
10,011
0.75
6,951
0.52
1,331,650
100.00
1,331,650
100.00
(b) Treasury shares
These shares are initially held as “treasury shares” and are regularly granted to key management and other employees
as a part of the share-based program established in 2004, as described in Note 23 (b). Shares transferred to employees
are recognized on a first-in-first-out basis.
Movements in treasury shares are as follows:
Number of shares
Number of shares
2022
2021
As at 1 January (Note 20 (a))
6,951
406
Purchased during the year
6,585
8,115
Distributed during the year
(3,525)
(1,570)
As at 31 December (Note 20 (a))
10,011
6,951
(c) Legal reserves
A legal reserve in the amount of 5% of total share capital was formed during previous periods by appropriation of 5% of
net profit per annum up to a cap of 5% of share capital. The legal reserve may be used to cover losses if the losses are
not covered by current net profit or if other reserves are not available. The Group recorded the required level of legal
reserves in 2000 and no further allocation to legal reserves is required. Legal reserves up to 5% of total share capital are
not distributable.
(d) Reserve for own shares
Reserve for own shares is separated by the decision of Annual General Meeting.
Annual report
203
Ericsson Nikola Tesla Group
Notes to the Consolidated Financial Statements of Ericsson Nikola Tesla Group (continued)
20 Equity (continued)
(e)
Dividends
Dividends payable are not accounted for until they have been ratified at the Annual General Meeting of shareholders.
On 27 June 2022, the Annual General Meeting approved a dividend in respect of 2021 of HRK 64.00 per share, totaling
HRK 84,649 thousand.
Cash dividends authorized and paid for previous years were as follows:
2022
2021
HRK ‘000
HRK ‘000
HRK 64.00 per share for 2021
84,649
-
HRK 82.00 per share for 2020
-
109,162
Prior year dividend payout
102
4
84,751
109,166
Annual report
204
Ericsson Nikola Tesla Group
Notes to the Consolidated Financial Statements of Ericsson Nikola Tesla Group (continued)
21 Borrowings
2022
2021
HRK ‘000
HRK ‘000
Loans
14,134
28,271
Borrowings, Note 4 (b)
1,621
2,894
Total liabilities for borrowings
15,755
31,165
Short term portion
14,134
14,134
Long term portion
1,621
17,031
Changes in liabilities from financing activities
Borrowings
HRK ‘000
Year ended 31 December 2021
Opening net book amount
44,703
Cash transactions
Proceeds from loans
-
Repayment of loans and borrowings
(14,831)
Non-cash transactions
Overtake of liability towards bank
1,787
Accrued interest
743
Foreign exchange differences
(3)
Release of obligations (Note 4(b))
(1,234)
Closing net book amount
31,165
Year ended 31 December 2022
Opening net book amount
31,165
Cash transactions
Proceeds from loans
-
Repayment of loans and borrowings
(26,190)
Non-cash transactions
Overtake of liability towards bank
12,691
Foreign exchange differences
1
Release of obligations (Note 4(b))
(1,912)
Closing net book amount
15,755
Loan is taken due to the Energy Efficiency project for premises in Zagreb (Krapinska 45). Loan is taken with fixed interest
rate. Borrowings movement reflect increase and repayment of the obligations toward banks arising from refinancing of
customer credit. Non-cash item is generated by forming obligation toward banks for existing customer financing
agreements.
Annual report
205
Ericsson Nikola Tesla Group
Notes to the Consolidated Financial Statements of Ericsson Nikola Tesla Group (continued)
22 Other non-current liabilities
2022
2021
HRK ‘000
HRK ‘000
Liabilities for issued guarantee, Note 4 (b)
4
297
Other non-current liabilities, Note 4 (b)
-
149
4
446
23 Employee benefits
a) Long-term service benefits
The Group does not operate any pension schemes or other retirement benefit schemes for the benefit of any of its
employees or management. In respect of all of the personnel, such social payments as required by the authorities are
paid. These contributions form the basis of social benefits payable out of the Croatian Pension Insurance Institute to the
Croatian employees upon their retirement. Additionally, in 2001 the Parent Company signed an Annex to the Union
Agreement based on which employees are entitled to a benefit upon early retirement.
However, the Group pays a one-time benefit amounting to HRK 8,000 for each employee who retires. Additionally, the
Group pays jubilee awards in respect of each 5 years of service of an employee, starting from the 10th year and ending
in the 40th year. The principal actuarial assumptions used to determine retirement and jubilee obligations as at 31
December 2022 were a 1.92% discount rate (2021: 1.92%) and a 6.66% (2021: 6.89%) rate of average employment
turnover.
Movements in long-term service benefits were as follows:
Jubilee
Jubilee
awards
Retirement
Total
awards
Retirement
Total
2022
2021
HRK ‘000
HRK ‘000
HRK ‘000 HRK ‘000
HRK ‘000
HRK ‘000
As at 1 January
7,132
1,465
8,597
9,360
1,028
10,388
Obligation created during the year
1,646
64
1,710
-
461
461
Obligation fulfilled during the year
(1,925)
(64)
(1,989)
(875)
(24)
(899)
Obligation reversed during the year
-
(7)
(7)
(1,353)
-
(1,353)
As at 31 December
6,853
1,458
8,311
7,132
1,465
8,597
Annual report
206
Ericsson Nikola Tesla Group
Notes to the Consolidated Financial Statements of Ericsson Nikola Tesla Group (continued)
23 Employee benefits (continued)
b)
Share-based payments
In 2004, the Parent Company established its Loyalty program, a share-based scheme under key employees are entitled
to receive the Parent Company´s shares conditional on the employee completing certain years of service (the vesting
period) from the grant date.
The treasury shares are distributed to eligible employees upon ratification at the Annual General Meeting.
In 2022 the Parent Company continued its Loyalty program and granted additional shares to eligible employees under vesting
condition related to years of service with the Parent Company.
Movements in shares under the Award and Loyalty programs are as follows:
2022
2021
Number of shares
Number of shares
As at 1 January
14,455
6,915
Granted
50
9,335
Exercised
(3,525)
(1,570)
Expired
(330)
(225)
As at 31 December
10,650
14,455
Vesting conditions for shares granted under Loyalty program are one to four years of service.
The fair value of service received in return for shares granted is measured by reference to the observable market price of
shares at the grant date.
During 2022, the Group had HRK 7,511 thousand expenses (2021: HRK 4,404 thousand) in respect of share-based
payments, which are included in personnel expenses as disclosed in Note 8.
Annual report
207
Ericsson Nikola Tesla Group
Notes to the Consolidated Financial Statements of Ericsson Nikola Tesla Group (continued)
24 Trade and other payables
2022
2021
HRK ‘000
HRK ‘000
Trade payables
116,602
94,629
Liabilities to employees
159,223
132,550
VAT liabilities
15,233
-
Other current liabilities
28,295
26,322
319,353
253,501
25 Provisions
Movements in provisions were as follows:
Warranty
Termination
Other
Total
reserve
benefits
reserve
HRK ‘000
HRK ‘000
HRK ‘000
HRK ‘000
As at 1 January 2021
2,317
5,031
6,370
13,718
Additional provisions
821
7,238
-
8,059
Unused provisions reversed
(202)
(44)
(360)
(606)
Provisions used during the year
(807)
(6,514)
(249)
(7,570)
As at 31 December 2021
2,129
5,711
5,761
13,601
As at 1 January 2022
2,129
5,711
5,761
13,601
Additional provisions
21
6,409
3,533
9,963
Unused provisions reversed
(164)
-
-
(164)
Provisions used during the year
(162)
(7,229)
(60)
(7,451)
As at 31 December 2022
1,823
4,891
9,234
15,949
The warranty reserve is established to cover the expected warranty claims on products sold during the year. Reversal of
warranty reserves relates to expired warranties.
Followed by the prudence principle and based on the circumstances and other factors, including expectations of future
events, additional provisions were made.
Annual report
208
Ericsson Nikola Tesla Group
Notes to the Consolidated Financial Statements of Ericsson Nikola Tesla Group (continued)
26 Accrued charges and deferred
revenue
2022
2021
HRK ‘000
HRK ‘000
Deferred revenue
5,968
5,928
Accrued charges for unused holidays
36,310
31,728
Accrued charges in respect of service contracts
91,098
45,128
Other accrued charges
32,827
37,699
166,203
120,483
Deferred revenue represents mainly government grants relating to costs which are deferred and recognized in income
statement at the same time when the relating costs are recognized.
Accrued charges in respect of service contracts mainly represent costs incurred for which no invoice has been received
from supplier or other external contractor at the balance sheet date.
Annual report
209
Ericsson Nikola Tesla Group
Notes to the Consolidated Financial Statements of Ericsson Nikola Tesla Group (continued)
27 Contract liabilities
The Group has recognized the following liabilities arising from contracts with customers:
31 December 2022 31 December 2021
HRK ‘000
HRK ‘000
Contract liabilities – advances from customers
17,090
52,528
Contract liabilities – deferred revenue
175,150
237,448
Total current contract liabilities
192,240
289,976
As at 31 December 2022 the Group recognized HRK 192,240 thousand of contract liabilities in respect of the contracts
related to modernization of mobile and fixed network, project-related services and support activities, e-Health
Information Systems and other (as at 31 December 2021: HRK 289,976 thousand).
The following table presents information on unsatisfied performance obligations resulting from long-term contracts with
customers.
31 December 2022 31 December 2021
HRK ‘000
HRK ‘000
Aggregate amount of the transaction price allocated to long-term
contracts that are fully unsatisfied
101,601
107,350
Aggregate amount of the transaction price allocated to long-term
contracts that are partially unsatisfied
88,316
363,166
189,917
470,516
The Group expects to recognize approximately 60% of the transaction price allocated to the remaining performance
obligations as revenue in financial year 2023, 37% as revenue in financial year 2024, 2% as revenues in financial year
2025 and 1% as revenues in financial year 2026.
All other contracts are for periods of one year or less or are billed based on time incurred.
Annual report
210
Ericsson Nikola Tesla Group
Notes to the Consolidated Financial Statements of Ericsson Nikola Tesla Group (continued)
28 Leases
(a)
Leases as lessee
The Group leases warehouse, office premises and parking lots. The leases typically run for a period of 5 years, with an
option to renew the lease after that date. For certain leases, the Group is restricted from entering into any sub
‑lease
arrangements.
The warehouse, office premises and parking lots were entered many years ago as combined leases of land and buildings.
The Group leases vehicles under a number of leases. The leases typically run for a period of 3 to 5 years.
Information about leases for which the Group is a lessee is presented below.
Right-of-use assets
Right‑of‑use assets related to leased properties that do not meet the definition of investment property are presented as
property, plant and equipment.
2022
2021
HRK ‘000
HRK ‘000
Balance as at 1 January
52,087
53,955
Depreciation charge for the year
(19,626)
(20,642)
Increase of right‑of‑use assets
12,742
20,810
Modifications
-
382
Derecognition of RoU assets
(556)
(2,418)
Balance as at 31 December
44,644
52,087
Amounts recognized in Statement of comprehensive income
2022
2021
Leases under IFRS 16
HRK ‘000
HRK ‘000
1,190
1,205
Interest on lease liabilities
92
180
Income from sub-leasing
86
1,929
Expenses relating to short-term leases
Annual report
211
Ericsson Nikola Tesla Group
Notes to the Consolidated Financial Statements of Ericsson Nikola Tesla Group (continued)
28 Leases (continued)
(a)
Leases as lessee (continued)
Extension options
Some property leases contain extension options exercisable by the Group up to one year before the end of the non-
cancellable contract period. Where practicable, the Group seeks to include extension options in new leases to provide
operational flexibility.
The Group assesses at lease commencement date whether it is reasonably certain to exercise the extension options. The
Group reassesses whether it is reasonably certain to exercise the options if there is a significant event or significant
changes in circumstances within its control.
The following table sets out a movement in lease liability:
2022
2021
HRK ‘000
HRK ‘000
Balance as at 1 January
52,410
54,960
Repaid lease liability
(19,387)
(22,807)
Additions to lease liability
12,742
20,810
Modifications
-
382
Derecognition of lease
(556)
(2,436)
Interest expense
1,190
1.205
Interest paid
(1,190)
(1,205)
FX rate
(402)
1,501
Balance as at 31 December
44,807
52,410
(b)
Leases as lessor
The Group leases out its property consisting of commercial properties. All leases are classified as operating leases from
a lessor perspective.
Operating lease
The Group leases out its owned commercial properties. The Group has classified these leases as operating leases,
because they do not transfer substantially all of the risks and rewards incidental to the ownership of the assets.
Rental income recognized by the Group during 2022 was HRK 30,596 thousand (2021: HRK 15,092 thousand).
The following table sets out a maturity analysis of lease payments to be received after the reporting date.
2022
2021
Operating leases under IFRS 16
HRK ‘000
HRK ‘000
Less than one year
10,370
7,611
Between one and three years
19,169
12,063
Between three and five years
9,549
7,607
More than five years
4,091
7,775
Total
43,179
35,056
Annual report
212
Ericsson Nikola Tesla Group
Notes to the Consolidated Financial Statements of Ericsson Nikola Tesla Group (continued)
29 Balances and transactions with
related parties
For the purposes of these consolidated financial statements, parties are generally considered to be related if one party
has the ability to control the other party, is under common control, or can exercise significant influence over the other
party in making financial and operational decisions. In considering each possible related party relationship, attention is
directed to the substance of the relationship, not merely the legal form.
The Group is a related party to the Ericsson Group via the 49.07% (2021: 49.07%) shareholding by Telefonaktiebolaget
LM Ericsson, which is also the ultimate parent of the Ericsson Group.
The Group has related-party relationships with Telefonaktiebolaget LM Ericsson, Ericsson Group subsidiaries and
associates, the Supervisory Board, the Management Board and other executive management.
(a)
Key transactions with the related parties
Major transactions with the Ericsson Group companies may be summarized as follows:
Telefonaktiebolaget LM
Other Ericsson Group
Total
Ericsson
consolidated companies
2022
2021
2022
2021
2022
2021
HRK ‘000 HRK ‘000
HRK ‘000
HRK ‘000
HRK ‘000
HRK ‘000
Sales of goods and services
Sales revenue
-
-
1,024,142
899,522
1,024,142
899,522
Other income
-
-
22
496
22
496
-
-
1,024,164
900,018
1,024,164
900,018
Purchases of goods and services
Licenses
6,010
6,400
17,668
18,559
23,678
24,959
Cost of sales
-
-
253,530
272,240
253,530
272,240
6,010
6,400
¸271,198
290,799
277,208
297,199
The sales of goods and services transactions have been directly negotiated between the involved parties and agreed on
an individual basis. The Group pays: (i) license fees on sales of services and products, (ii) corporate trademark licenses,
(iii) support services, (iv) R&D tools and (v) IS/IT fee. The license fee is paid as a percentage of sales of services and
sales of products.
Annual report
213
Ericsson Nikola Tesla Group
Notes to the Consolidated Financial Statements of Ericsson Nikola Tesla Group (continued)
29 Balances and transactions with
related parties (continued)
(b) Key management compensation
The key management includes the executive management listed under the Parent Company profile, comprising the
Management Board member and the directors of the main organizational units, which on the Group level also
includes the directors of key operating companies.
2022
2021
HRK ‘000
HRK ‘000
Salaries and other short-term employee benefits
31,481
31,279
31,481
31,279
The members of the executive management and the Supervisory Board held 3,669 ordinary shares at the year-end
(2021: 4,429 shares).
In addition, the Group paid remuneration totaling HRK 488 thousand (2021: HRK 423 thousand) to the Supervisory
Board and Audit Committee members during 2022.
(c) Year-end balances arising from sales and purchases of goods and services
Year-end balances arising from key transactions with Ericsson Group companies may be summarized as follows:
Trade receivable
Trade payable
2022
2021
2022
2021
HRK ‘000
HRK ‘000
HRK ‘000
HRK
‘000
Telefonaktiebolaget LM Ericsson (LME), largest individual shareholder
-
-
46
55
Other Ericsson Group companies
134,748
76,808
52,693
12,573
134,748
76,808
522,739
12,628
Annual report
214
Ericsson Nikola Tesla Group
Notes to the Consolidated Financial Statements of Ericsson Nikola Tesla Group (continued)
30 Financial risk management
The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk, and
price risk), credit risk and liquidity risk. Exposure to currency, interest rate and credit risk arises in the normal course of
the Group’s business. Risk management is carried out by a treasury department and its principal role is to actively
manage investment of excess liquidity as well as financial assets and liabilities, and to manage and control financial risk
exposures. The Group also has a customer finance function with the main objective to find suitable third-party financing
solutions for customers and to minimize recourse to the Group. Risk management policies that relate to financial
instruments can be summarized as follows:
(a) Currency risk
Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates.
The Group is exposed to US dollars and to the euro, as a substantial proportion of receivables and foreign revenues are
denominated in these currencies. Risk management relies on attempts to match, as much as possible, revenues in each
currency with the same currency expenditure. The Group may enter into foreign currency forward contracts to hedge
economically its exposure to currency risk arising on operating cash flows.
As at 31 December 2022, if the euro and US dollar had weakened/strengthened by 1% (2021: 1%) against the Croatian
kuna, with all other variables held constant, the net result after tax for the reporting period would have been HRK 1,329
thousand higher/lower (2021: HRK 1,334 thousand), mainly as a result of foreign exchange losses/gains on translation
of cash, cash equivalents, deposits, trade payables, customer receivables and customer financing denominated in euro.
Other currencies to which the Group is exposed are: SEK, BAM, PLN, GBP.
The Group continues to focus on securing natural hedges and active currency management and to minimize impacts
from currency moves. The Group’s exposure to foreign currencies is shown in the table below.
Annual report
215
Ericsson Nikola Tesla Group
Notes to the Consolidated Financial Statements of Ericsson Nikola Tesla Group (continued)
30 Financial risk management
(continued)
(a)
Currency risk (continued)
The tables below present the currency analysis and the resulting gap.
Total
Other
foreign
2023
EUR
USD
currency
currencies
HRK
Total
HRK ‘000
HRK ‘000
HRK ‘000
HRK ‘000
HRK ‘000
HRK ‘000
Loans and receivables
10,220
-
-
10,220
5,548
15,768
Trade and other receivables
173,774
3,546
22,805
200,125
172,743
372,868
Financial assets at fair value
through profit or loss
-
-
-
-
31,074
31,074
Cash and cash equivalents
77,751
10,198
7,603
95,552
436,694
532,246
261,745
13,744
30,408
305,897
646,059
951,956
Borrowings and lease
(46,107)
-
-
(46,107)
(14,454)
(60,561)
liabilities
Trade and other payables
(65,090)
(2,158)
(1,588)
(68,836)
(324,460)
(393,296)
(111,197)
(2,158)
(1,588)
(114,943)
(338,914)
(453,857)
Currency gap
150,548
11,586
28,820
190,954
307,145
498,099
Total
Other
foreign
2022
EUR
USD
currency
currencies
HRK
Total
HRK ‘000
HRK ‘000
HRK ‘000
HRK ‘000
HRK ‘000
HRK ‘000
Loans and receivables
10,264
1,828
-
12,092
9,836
21,928
Trade and other receivables
162,888
5,189
15,376
183,453
115,107
298,560
Financial assets at fair value
through profit or loss
-
-
1,259
1,259
31,740
32,999
Cash and cash equivalents
82,952
14,339
9,188
106,479
384,326
490,805
256,104
21,356
25,823
303,283
541,009
844,292
Borrowings and lease
liabilities
(53,223)
5
-
(53,218)
(30,357)
(83,575)
Trade and other payables
(59,933)
(1,669)
(988)
(62,590)
(272,429)
(335,019)
(113,156)
(1,664)
(988)
(115,808)
(302,786)
(418,594)
Currency gap
180,938
19,692
24,835
187,475
238,223
425,698
Annual report
216
Ericsson Nikola Tesla Group
Notes to the Consolidated Financial Statements of Ericsson Nikola Tesla Group (continued)
30 Financial risk management
(continued)
(b)
Interest rate risk
Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates.
As the Group mainly has its customer financing at a fixed interest rate and only a small portion of customer financing is
affected by possible changes in market interest rates, the risk of fluctuating market interest rates is considered low. The
Group also has deposits in financial institutions at a variable interest rate.
As at 31 December 2022:
– if the effective EUR interest rate on EUR deposits had increased/decreased by 1% (2021: 1%) on an annual level, the
net result due to changes in EUR deposits after tax for the reporting period would have been HRK 0 thousand
higher/lower (2021: HRK 0 thousand);
– if the effective HRK interest rate on HRK deposits had increased/decreased by 1% (2021: 1%) on an annual level, the
net result due to changes in HRK deposits after tax for the reporting period would have been HRK 0 thousand
higher/lower (2021: HRK 0 thousand);
– if the effective USD interest rate on USD deposits had increased/decreased by 1% (2021: 1%) on an annual level, the
net result due to changes in USD deposits after tax for the reporting period would have been HRK 0 thousand
higher/lower (2021: HRK 0 thousand).
The following table presents the annual average interest rates exposure of financial assets.
Average interest
Average interest
rates
rates
2022
2021
%
%
Loans and receivables
0.09
0.14
Cash and cash equivalents
0.01
0.07
Annual report
217
Ericsson Nikola Tesla Group
Notes to the Consolidated Financial Statements of Ericsson Nikola Tesla Group (continued)
30 Financial risk management
(continued)
(c)
Price risk
The Group has insignificant exposure to debt securities price risk due to low investments and all classified on the balance
sheet at fair value through profit or loss (investments funds).
(d)
Credit risk
Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party
to incur a financial loss. Significant risk is associated with high level of customer finance receivables.
The internal directives to manage the credit risks have been tightened during 2015 with the implementation of updated
credit management framework and implementation of credit evaluation tools to manage credit risks.
Credit Management function within the Group Treasury has been established to further assist the Group in managing its
credit risk exposure. New customers are only accepted on satisfactory completion of a detailed credit check of the
customer and a review of the related country risk. Outstanding credit arrangements are monitored on a quarterly or
annual basis depending on risk category. Impairment losses are calculated by discounting receivables. Additionally,
there is credit concentration risk as the Group has a significant portion of receivables outstanding from a small number
of customers. As at 31 December 2022, the five largest customers represent 64% of total net trade receivables (2021:
57%). The Group considers that its maximum exposure to credit risk is reflected in the amount of trade receivables (Notes
14 and 16) and other receivables (Note 17), not including impairment for doubtful receivables. Ageing analysis of these
receivables is within the maturity analysis table shown further in this note.
Letters of credit are used as a method for securing payments from customers operating in certain markets, in particular
in markets with unstable political and/or economic environments. By having banks confirming the letters of credit, the
political and commercial credit risk exposures are mitigated.
Prior to the approval of new facilities reported as customer finance, an internal credit risk assessment is conducted in
order to assess the credit rating (for political and commercial risk) of each transaction. A reassessment of the credit rating
for each customer finance facility is made on a regular basis.
The Group defines customer financing as any credit period longer than 179 days. The Group is working closely with
Croatian Bank for Reconstruction and Development (HBOR) and partnership banks to secure risk mitigation. Provisions
related to customer finance risk exposures are only made when they are reliably measurable and where, after the
financing arrangement has become effective, certain events occur which are expected to have a significant adverse
impact on the borrower’s ability and/or willingness to service the outstanding debt. These events can be political
(normally outside the control of the borrower) or commercial, e.g. the borrower’s deteriorating creditworthiness.
Security arrangements for customer finance facilities normally include pledges of equipment and pledges of certain of
the borrower’s assets. If available, third-party risk coverage may also be arranged. “Third-party risk coverage” means
that a financial payment guarantee covering the credit risk has been issued by a bank, an export credit agency or other
financial institution. It may also be a credit risk transfer under the so-called “sub-participation arrangement” with a bank,
whereby the credit risk and the funding is taken care of by the bank for the part covered by the bank. A credit risk cover
from a third party may also be issued by an insurance company.
Impairment of receivables
Cash equivalents amounted to HRK 532,246 thousand as at 31 December 2022 (31 December 2021: HRK 479,288
thousand). Provisions for expected credit losses on cash and deposits amounted to HRK 1,581 thousand as at 31
December 2022 (31 December 2021: HRK 2,163 thousand). The Group’s write-offs have historically been low.
Trade receivables, receivables from related party and contract assets together amounted to HRK 362,968 thousand as
at 31 December 2022 (31 December 2021: HRK 278,281 thousand). Provisions for expected credit losses on trade
receivables and receivables from related party amounted to HRK 2,560 thousand as at 31 December 2022 (31 December
2021: HRK 7,654 thousand). The Group’s write-offs have historically been low.
Annual report
218
Ericsson Nikola Tesla Group
Notes to the Consolidated Financial Statements of Ericsson Nikola Tesla Group (continued)
30 Financial risk management
(continued)
(d) Credit risk (continued)
The following tables provide an ageing detail of current and overdue amounts in respect of all customer loans and
receivables as at 31 December 2022.
Table 1
Payment due date for total customer loans and receivables*
Over 3
Up to 3
3 months
1 to 3
Due balance
months
to 1 year
years
years
Total
HRK ‘000
HRK ‘000
HRK ‘000
HRK ‘000 HRK ‘000
HRK ‘000
2022
Foreign receivables
6,763
32,056
3,782
3,719
-
46,320
Domestic receivables
5,085
156,445
25,117
-
-
186,647
Receivables from related parties
4,425
131,851
-
-
-
136,276
16,273
320,352
28,899
3,719
-
369,243
* excluding impairment allowance
2021
Foreign receivables
2,170
64,778
32,589
6,138
109
105,784
Domestic receivables
90,056
17,009
13
-
-
107,078
Receivables from related parties *
6,514
71,630
-
-
-
78,144
98,740
153,417
32,602
6,138
109
291,006
* excluding impairment allowance
Table 2
Ageing of total due customer loans and receivables
Up to 3
3 months
1 to 3
Over 3
months
to 1 year
years
years
Total
HRK ‘000
HRK ‘000
HRK ‘000 HRK ‘000
HRK ‘000
2022
4,027
2,736
-
-
6,763
Foreign receivables
645
Domestic receivables
2,851
1,480
109
5,085
215
Receivables from related parties
3,369
668
173
4,425
4,884
860
10,247
282
16,273
2021
Foreign receivables
2,170
-
-
-
2,170
Domestic receivables
78,322
11,278
400
56
90,056
Receivables from related parties
3,413
2,634
371
96
6,514
83,905
13,912
771
152
98,740
Annual report
219
Ericsson Nikola Tesla Group
Notes to the Consolidated Financial Statements of Ericsson Nikola Tesla Group (continued)
30 Financial risk management
(continued)
(e) Liquidity risk
Liquidity risk, also referred to as funding risk, is the risk that an enterprise will encounter difficulty in raising funds to
meet commitments associated with financial instruments. As the Group has no significant commitments in financial
instruments, the risk lies only in its daily operations. The Group has a strong focus on its cash flow with daily updates on
actual development and monthly updated forecasts. The Group’s maturity profile demonstrates the strong liquidity
position of the Group and therefore the risk is considered low. The table below presents the maturity analysis and the
resulting gap.
The Group has a revolving credit facility with our core banks should an extraordinary liquidity need arise. As at 31
December 2022, the facility remained untapped.
Up to 1
1–3
3–12
1–5
Over 5
2022
Total
month
months
months
years
years
HRK ‘000
HRK ‘000
HRK ‘000
HRK ‘000
HRK ‘000
HRK ‘000
Loans and receivables
-
-
-
14,688
1,080
15,768
Trade and other receivables
231,003
113,211
28,654
-
-
372,868
Current financial assets
31,074
-
-
-
-
31,074
Cash and cash equivalents
528,246
-
4,000
-
-
532,246
790,323
113,211
32,654
14,688
1,080
951,956
Borrowings
-
-
(14,088)
(1,903)
-
(15,991)
Lease liabilities
-
-
(16,905)
(27,665)
-
(44,570)
Trade and other payables
(248,805)
(144,186)
(305)
-
-
(393,296)
(248,805)
(144,186)
(31,298)
(29,568)
-
(453,857)
Maturity gap
541,518
(30,975)
1,356
(14,880)
1,080
498,099
Up to 1
1–3
3–12
1–5
Over 5
2021
Total
month
months
months
years
years
HRK ‘000
HRK ‘000
HRK ‘000
HRK ‘000
HRK ‘000
HRK ‘000
Loans and receivables
3
18
54
20,059
1,794
21,928
Trade and other receivables
196,665
72,027
28,626
1,242
-
298,560
Current financial assets
32,999
-
-
-
-
32,999
Cash and cash equivalents
477,488
-
13,317
-
-
490,805
707,155
72,045
41,997
21,301
1,794
844,292
Borrowings
-
-
(28,222)
(3,431)
-
(31,653)
Lease liabilities
-
-
(18,736)
(33,186)
-
(51,922)
Trade and other payables
(218,814)
(112,342)
(3,421)
(442)
-
(335,019)
(218,814)
(112,342)
(50,379)
(37,059)
-
(418,594)
Maturity gap
488,341
(40,297)
(8,382)
(15,758)
1,794
425,698
Annual report
220
Ericsson Nikola Tesla Group
Notes to the Consolidated Financial Statements of Ericsson Nikola Tesla Group (continued)
30 Financial risk management
(continued)
(f)
Fair value estimation
Financial assets at fair value through profit and loss are carried at fair value at the balance sheet date. The fair value is
estimated by reference to their quoted active market price at the balance sheet date which represents Level 1 input (Note
18).
A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker,
industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market
transactions on an arm’s length basis. The quoted market price used for financial assets held by the Group is the current
bid price. There are no financial assets derived from level 2 inputs which represent different valuation techniques based
on observable market data or from level 3 inputs which represent different valuation techniques based on no observable
market data.
The Group’s principal financial instruments not carried at fair value are cash and cash equivalents, trade receivables,
other receivables, non-current loans and receivables, trade and other payables and borrowings.
The fair value of loans and receivables and the fair value of borrowings are calculated based on the Management’s best
estimate of discounted expected future principal and interest cash flows, using the market-related rate for a similar
instrument at the balance sheet date as a discount rate. Fair values and carrying amounts are not significantly different
as the loans and receivables were granted at market rates, which were not substantially different from market rates at
the end of the reporting year. Current financial assets are stated at fair value that is based on quoted prices at the balance
sheet date without any deduction for transaction costs.
The carrying amount of cash and cash equivalents and of bank deposits reflects fair value due to the short-term maturity
of these financial instruments. Similarly, the amortized cost carrying amounts of trade receivables and payables with
remaining life of less than one year and which are all subject to normal trade credit terms reflect fair values. In 2022
1.33% (2021: 0.75%) interest rates were used for determining fair values, which are based on available market rates for
similar financial instruments.
(g)
Capital management
The Group’s objectives when managing capital are:
To safeguard the entity’s ability to continue as a going concern, so that it can continue to provide returns for
–
shareholders and benefits for other stakeholders;
To provide adequate requirements for capital resources, as far as possible, by the retention of profit;
–
To maintain a prudent balance sheet with adequate component of cash and short-term assets, as well as
–
equity and other investments; and
To secure adequate back-up funding facilities should a need arise.
–
The Group is generating sufficient cash from operations to fund liabilities as they become due, finance customers when
required and budgeted investments, and pay dividends.
The Group monitors capital using the statutory minimum capital requirement. Shareholders’ equity is disclosed in Note
20 to the consolidated financial statements.
Annual report
221
Ericsson Nikola Tesla Group
Notes to the Consolidated Financial Statements of Ericsson Nikola Tesla Group (continued)
31 Subsequent events
The Government of the Republic of Croatia adopted the Decision on the announcement of the introduction of the euro
as the official currency in the Republic of Croatia (published in "Official Gazette" No. 85/22). With the aforementioned
decision, the euro becomes the official monetary unit and legal currency in the Republic of Croatia on 1 January 2023.
The fixed conversion rate is set at HRK 7.53450 for one euro. The introduction of the euro as the official currency in the
Republic of Croatia represents a change in the functional currency that will be calculated prospectively and does not
represent an adjusting subsequent event.
Annual report
222
Ericsson Nikola Tesla Group
Financial statements
of Ericsson Nikola
Tesla d.d. and
Independent
Auditors’ Report
Annual report
223
Ericsson Nikola Tesla Group
Ericsson Nikola Tesla d.d.
Financial Statements
and Independent Auditors’ Report
31 December 2022
Annual report
224
Ericsson Nikola Tesla Group
Ericsson Nikola Tesla d.d.
Company profile
History and incorporation
a leading supplier and exporter of specialized telecommunications equipment, ICT solutions, software and services in
Central and Eastern Europe.
The Company was founded on 13 May 1995, as a result of the privatization of the enterprise Nikola Tesla - Poduzeće za
proizvodnju telekomunikacijskih sistema i uređaja, po.
According to the ownership structure as at 31 December 2022, Telefonaktiebolaget LM Ericsson (Ericsson) holds 49.07%
of the Company’s shares. Other shareholders own the remaining 50.18% of the Company’s shares and 0.75% is held as
treasury shares.
Principal activities
The principal activities of the Company are research and development of telecommunications software and services,
design, testing and integration of total communications solutions, and supply and maintenance of communications
solutions and ICT solutions towards customers within the Ericsson Group, customers in the Republic of Croatia, and
Bosnia and Herzegovina, and several customers in Central and Eastern Europe.
Ericsson Nikola Tesla d.d. is a joint-stock company incorporated in
Croatia
. The headquarters of the Company are in
Code of Corporate Governance
The Company applies the Code of Corporate Governance of the Zagreb Stock Exchange and meets the obligations
derived therefrom, with the exception of provisions whose application is not practical at the moment.
Annual report
225
Ericsson Nikola Tesla Group
Ericsson Nikola Tesla d.d.
Company profile (continued)
Supervisory Board, Audit Committee, Management Board and Executive management of Ericsson Nikola
Tesla d.d.
Supervisory Board
The Supervisory Board members during 2022 and up to the release of these statements were:
Franck Pierre Roland Bouétard
Chairman
Reappointed on 27 June 2022
Olgica Spevec
Member; Vice-Chairman
Appointed on 13 June 2019; elected for
Vice-chairman of Supervisory Board on 17
December 2020
Petra Vranjes
Member
Appointed on 29 June 2021, member until
1 January 2023
Ana Vrsaljko Metelko
Member
Appointed on 29 June 2021
Petar Šimundža
Member and employees'
Apppointed on 29 November 2022
representative
Vladimir Filipović
Member and employees'
Appointed on 29 November 2018, member
representative
until 29 November 2022
Audit Committee
The Audit Committee members during 2022 and up to the release of these consolidated statements were:
Olgica Spevec
Chairman
Appointed on 17 December 2020
Petra Vranjes
Member
Appointed on 12 July 2021, member until
1 January 2023
Vesna Vašiček
Member
Appointed on 21 February 2017
Annual report
226
Ericsson Nikola Tesla Group
Ericsson Nikola Tesla d.d.
Company profile (continued)
Management Board
The Management Board has one member:
Gordana Kovačević
President
Reappointed on 17 December 2019
Executive management
As at 31 December 2022, the executive management comprised:
Gordana Kovačević
Company President
Antonija Lončar
Director, Marketing, Communications & Corporate Social Responsibility
Branka Vučemilo Elezović
Director, Legal
Branko Dronjić
Director, IT&Test Environment Operations
Damir Bušić
Director, Finance, Sourcing and Commercial Management
Darko Huljenić
Director, Research
Drago Holub
Director, R&D Center
Goran Ožbolt
Director, General Services
Hrvoje Benčić
Director, Digital Services and Operations, Networks and Media
Ivan Barać
Director, Sales and Marketing for Hrvatski Telekom and Crnogorski Telekom
Jagoda Barać
Director, Sales and Marketing for Export markets for Op. Seg.
Milan Živković
Director, Strategy and Business Development & GIR
Miroslav Kantolić
Director, Sales and Marketing for A1 Croatia
Tihomir Fabeta
Director, ICT for Industry and Society
Vjeran Buća
Director, Sales and Marketing for Industry and Society
Željko Antolić
Director, Human Resources
Annual report
228
Ericsson Nikola Tesla Group
Independent Auditors’ Report to the shareholders of
Ericsson Nikola Tesla d.d.
Report on the Audit of the Financial Statements
Opinion
We have audited the separate financial statements of Ericsson Nikola Tesla d.d. (“the Company”), which comprise
the separate statement of financial position of the Company as at 31 December 2022, and its separate statements
of comprehensive income, cash flows and changes in equity for the year then ended, and notes, comprising
significant accounting policies and other explanatory information (further referred to as “the financial
statements”).
In our opinion, the accompanying financial statements give a true and fair view of the unconsolidated financial
position of the Company as at 31 December 2022 and of its unconsolidated financial performance and its
unconsolidated cash flows for the year then ended in accordance with International Financial Reporting Standards
as adopted by the European Union (“EU IFRS”).
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing. Our responsibilities under those
standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section
of our report. We are independent of the Company in accordance with the ethical requirements that are relevant
to our audit of the financial statements in Croatia and we have fulfilled our other ethical responsibilities in
accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of
the financial statements of the current period. These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters.
Annual report
229
Ericsson Nikola Tesla Group
Independent Auditors’ Report to the shareholders of
Ericsson Nikola Tesla d.d. (continued)
Report on the Audit of the Financial Statements (continued)
Key Audit Matters (continued)
REVENUE RECOGNITION
Sales revenue in 2022: HRK 1,661,347 thousand (2021: HRK 1,522,626 thousand). As at 31 December 2022: trade
receivables: HRK 118,686 thousand; contract liabilities: HRK 184,214 thousand (31 December 2021: trade
receivables: HRK 108,484 thousand; contract liabilities: HRK 247,309 thousand).
Please refer to the Note 1 Revenue recognition of Significant accounting policies, Note 4 c) Revenue recognition of
Critical accounting estimates and judgements, Note 5 Sales revenue and Note 6 Segment reporting in the financial
statements.
Key audit matter
How our audit addressed the matter
In the year ended 31 December 2022, the Company’s
Our audit procedures in this area included, among others:
principal revenue streams included sales of products
Obtaining understanding of and evaluating the
and software, as well as provision of services,
Company’s revenue recognition process, and testing
including installation and integration services,
related key internal controls in particular the controls
maintenance and support.
associated with project feasibility and adequacy of
Application of revenue recognition principles of the
approvals, segregation of duties, determination of
relevant financial reporting standards is complex and
revenue recognition pattern, fulfillment of contracts
requires making significant assumptions and
and procedures related to finalization of projects and
judgments. Particular complexity is associated with
acceptance by the customer;
the following factors:
Assessing the Company’s revenue recognition policy
—
In the Company’s Networks and Digital
for compliance with relevant provisions of the
services segment, goods and services with
financial reporting standards;
different revenue recognition patterns may be
For a sample of contracts with customers concluded
sold as part of one contract or several
during the audited year, inspecting contractual
contracts accounted for as one arrangement.
provisions and making inquiries of project managers
The Company applies significant judgment,
and relevant finance personnel in order to challenge
among other things, in identifying contracts
the Company’s:
which require to be combined and accounted
for as one arrangement, and identifying
Meeting of the contract existence criteria,
o
performance obligations therein, including
including, among other things, those relating to
those, if any, resulting from warranties and
the parties’ commitment to their obligations and
non-returnable upfront fees;
probability of collecting the consideration due;
—
Each performance obligation requires
Identification of the contracts which require to
o
evaluation of whether it is satisfied over time
be accounted for on a combined basis and of
or at a point in time. The determination
performance obligations within contracts. The
requires a thorough consideration of
procedure included, among other things,
contractual provisions to understand when
assessing the nature of the warranties provided
control of the promised products or services is
to customers for potential consideration as
transferred to customers. Note 6 of the
performance obligations;
financial statements provides details of the
timing and pattern of recognition of revenue
for key revenue streams;
Annual report
230
Ericsson Nikola Tesla Group
Independent Auditors’ Report to the shareholders of
Ericsson Nikola Tesla d.d. (continued)
Report on the Audit of the Financial Statements (continued)
Key Audit Matters (continued)
REVENUE RECOGNITION (CONTINUED)
Key audit matter (continued)
How our audit addressed the matter (continued)
—
Although contracts with customers are usually
Determination of total contract consideration, by
o
agreed with fixed transaction price, significant
reference to contracts with customers and any
judgement is required in allocating the transaction
subsequent modifications to the frame agreement, if
price to the performance obligations. The
any;
transaction price, which is the consideration the
Allocation of the contract consideration to each of the
o
Company expects to receive for the transfer of
identified performance obligations, based on their
products and services to the customer, is allocated
estimated stand-alone selling prices, also by reference
to the performance obligations based on its
to the sales department’s data and the analysis of
relative standalone selling price;
current transaction prices;
In the wake of the above factors, we considered
Determination of the timing of the transfer of control,
o
revenue recognition to be associated with a
the resulting pattern of revenue recognition and
significant risk of material misstatement in the
revenue amounts, by reference to sales invoices,
consolidated financial statements. Therefore, the area
inventory and shipping documents, customer
required our increased attention in the audit and as
acceptance forms and other documents as appropriate.
such was determined to be a key audit matter.
For a sample of customers, obtaining confirmations of the
amounts receivable outstanding as at the reporting date,
and challenging any significant differences between
confirmations received and the Company’s records by
inspecting the underlying documentation such as contracts
with customers, invoices, shipping documents and
customer acceptance forms;
Examining whether the Company’s revenue recognition-
related disclosures in the financial statements
appropriately include and describe the relevant
quantitative and qualitative information required by the
applicable financial reporting framework.
Other Information
Management is responsible for the other information. The other information comprises the Management Report
and the Corporate Governance Statement included in the Annual Report of the Company, but does not include
the financial statements and our auditor’s report thereon.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise
explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the financial statements or our
knowledge obtained in the audit, or otherwise appears to be materially misstated.
Annual report
231
Ericsson Nikola Tesla Group
Independent Auditors’ Report to the shareholders of
Ericsson Nikola Tesla d.d. (continued)
Report on the Audit of the Financial Statements (continued)
Other Information (continued)
With respect to the Management Report and the Corporate Governance Statement, we also performed
procedures required by the Accounting Act in Croatia (“Accounting Act”). Those procedures include considering
whether:
the Management Report has been prepared in accordance with the requirements of Article 21 of the
Accounting Act,
the Corporate Governance Statement includes the information specified in Article 22 of the Accounting
Act.
Based solely on the work required to be undertaken in the course of the audit of the financial statements and
procedures above, in our opinion:
the information given in the Management Report and the Corporate Governance Statement for the
financial year for which the financial statements are prepared, is consistent, in all material respects, with
the financial statements;
the Management Report has been prepared, in all material respects, in accordance with the requirements
of Article 21 of the Accounting Act;
the Corporate Governance Statement includes the information specified in Article 22 of the Accounting
Act.
In addition, in light of the knowledge and understanding of the entity and its environment obtained in the course
of the audit, we are also required to report if we have identified material misstatements in the Management
Report and the Corporate Governance Statement. We have nothing to report in this respect.
Responsibilities of Management and Those Charged with Governance for the Financial Statements
Management is responsible for the preparation of the financial statements that give a true and fair view in
accordance with EU IFRS, and for such internal control as management determines is necessary to enable the
preparation of the financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company’s ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic
alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
Annual report
232
Ericsson Nikola Tesla Group
Independent Auditors’ Report to the shareholders of
Ericsson Nikola Tesla d.d. (continued)
Report on the Audit of the Financial Statements (continued)
Auditors’ Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with International Standards on Auditing will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic decisions of users taken on the basis of these financial
statements.
As part of an audit in accordance with International Standards on Auditing, we exercise professional judgment and
maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the Company’s internal controls.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based
on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that
may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in our auditors’ report to the related
disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However,
future events or conditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the financial statements represent the underlying transactions and events in a
manner that achieves fair presentation.
Annual report
233
Ericsson Nikola Tesla Group
Independent Auditors’ Report to the shareholders of
Ericsson Nikola Tesla d.d. (continued)
Report on the Audit of the Financial Statements (continued)
Auditors’ Responsibilities for the Audit of the Financial Statements (continued)
We communicate with those charged with governance regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal controls that we
identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or
safeguards applied.
From the matters communicated with those charged with governance, we determine those matters that were of
most significance in the audit of the financial statements of the current period and are therefore the key audit
matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure
about the matter or when, in extremely rare circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of doing so would reasonably be expected to
outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
We were appointed by those charged with governance on 27 June 2022 to audit the separate financial statements
of Ericsson Nikola Tesla d.d. for the year ended 31 December 2022. Our total uninterrupted period of engagement
is four years, covering the year ended 31 December 2019, 31 December 2020, 31 December 2021 and 31
December 2022.
We confirm that:
our audit opinion is consistent with the additional report presented to the Audit Committee of the
Company dated 21 April 2023;
we have not provided any prohibited non-audit services (NASs) referred to in Article 44 of the Audit Act.
We also remained independent of the audited entity in conducting the audit.
The engagement partner on the audit resulting in this independent auditors’ report is Domagoj Hrkać.
Annual report
234
Ericsson Nikola Tesla Group
Independent Auditors’ Report to the shareholders of
Ericsson Nikola Tesla d.d. (continued)
Report on Compliance with the ESEF Regulation
In accordance with the requirements of Article 462 paragraph 5 of Capital Market Act, we are required to express
a conclusion on compliance of the separate financial statements of the Company as at and for the year ended 31
December 2022, as included in the attached electronic file FI‐ERNT‐2022‐1Y‐Revidirano‐Nekonsolidirano‐EN, with
the requirements of the Commission Delegated Regulation (EU) 2019/815 of 17 December 2018 supplementing
Directive 2004/109/EC of the European Parliament and of the Council with regard to regulatory technical
standards on the specification of a single electronic reporting format (the “RTS on ESEF”).
Responsibilities of Management and Those Charged with Governance
Management is responsible for the preparation of the separate financial statements in a digital format that
complies with the RTS on ESEF. This responsibility includes:
the preparation of the separate financial statements in the applicable xHTML format and their publication;
the selection and application of appropriate iXBRL tags, using judgment where necessary;
ensuring consistency between digitised information and the separate financial statements presented in
human-readable format; and
the design, implementation and maintenance of internal control relevant to the application of the RTS on
ESEF.
Those charged with governance are responsible for overseeing the Company’s ESEF reporting, as a part of the
financial reporting process.
Auditors' Responsibilities
Our responsibility is to express an conclusion, based on evidence obtained, as to whether the separate financial
statements comply, in all material respects, with the RTS on ESEF. We conducted our reasonable assurance
engagement in accordance with International Standard on Assurance Engagements 3000 (Revised), Assurance
Engagements Other than Audits or Reviews of Historical Financial Information (ISAE 3000) issued by the
International Auditing and Assurance Standards Board.
Work performed
A reasonable assurance engagement in accordance with ISAE 3000 involves performing procedures to obtain
evidence about compliance with the RTS on ESEF. The nature, timing and extent of procedures selected depend
on the auditor’s judgment, including the assessment of the risks of material departures from the requirements of
set out in the RTS on ESEF, whether due to fraud or error. Reasonable assurance is a high degree of assurance.
However, it does not guarantee that the scope of procedures will identify all significant (material) non‐compliance
with the RTS on ESEF.
In respect of the subject matter, we have performed the following procedures:
obtaining an understanding of the tagging process;
evaluating the design and implementation of relevant controls over the tagging process;
tracing the tagged data to the separate financial statements of the Company presented in human‐readable
format;
evaluating the completeness of the Company’s tagging of the separate financial statements;
Annual report
236
Ericsson Nikola Tesla Group
Ericsson Nikola Tesla d.d.
Statement of comprehensive income
for the year ended 31 December 2022
2022
2021
Notes
‘000 kn
‘000 kn
Sales revenue
5, 6
Cost of sales
(1,530,606 )
(1,351,875 )
7
Gross profit
Selling expenses
(42,568 )
(42,775 )
7
Administrative expenses
(41,819 )
(39,965 )
7
Other operating income
7
Impairment loss on financial assets
(216 )
(385 )
Operating profit
Finance income
9
Finance expense
(3,046 )
(1,142 )
9
Finance income/(expense), net
9
Profit before tax
Income tax
(1,490 )
(3,825 )
10
Profit for the year
Other comprehensive income
-
-
Total comprehensive income for the year
Earnings per share (HRK)
11
Annual report
237
Ericsson Nikola Tesla Group
Ericsson Nikola Tesla d.d.
Statement of financial position
as at 31 December 2022
2022
2021
HRK ‘000
HRK ‘000
Assets
Notes
Non-current assets
Property, plant and equipment
12
Right of use assets
29
Intangible assets
13
Investments in subsidiaries
15
Loans and receivables
14
Deferred tax assets
10
Total non-current assets
Current assets
Inventories
16
Trade receivables
17
Receivables from related parties
30(c)
Other receivables
18
Prepayments
Financial assets at fair value through profit or loss
19
Cash and cash equivalents
20
Total current assets
Total assets
Annual report
238
Ericsson Nikola Tesla Group
Ericsson Nikola Tesla d.d.
Statement of financial position
(continued)
as at 31 December 2022
2022
2021
Equity and liabilities
Notes
HRK ‘000
HRK ‘000
Equity
Share capital
21 (a)
Treasury shares
21 (b)
(17,090 )
(12,421 )
Legal reserves
21 (c)
Reserve for treasury shares
21 (d)
Retained earnings
Total equity
Non-current liabilities
Borrowings
22
Lease liabilities
29
Other non-current liabilities
23
Employee benefits
24 (a)
Total non-current liabilities
Current liabilities
Payables to related parties
30 (c)
Borrowings
22
Trade and other payables
25
Income tax payable
Provisions
26
Accrued expense and deferred revenue
27
Contract liabilities
28
Lease liabilities
29
Total current liabilities
Total liabilities
Total equity and liabilities
Annual report
239
Ericsson Nikola Tesla Group
Ericsson Nikola Tesla d.d.
Statement of changes in equity
for the year ended 31 December 2022
Reserve for
Share
Treasury
Legal
treasury
Retained
capital
shares
reserves
shares
earnings
Total
HRK ‘000
HRK ‘000
HRK ‘000
HRK ‘000
HRK ‘000
HRK ‘000
As at 1 January 2021
(506 )
Changes in equity for 2021
Profit for the year
-
-
-
-
Transactions with owners
Dividend distribution for 2020, Note 21 (e)
-
-
-
-
(109,162 )
(109,162 )
Share-based payments,
Note 24 (b)
-
-
-
-
Purchase of treasury shares, Note 21 (b)
-
(14,307 )
-
-
-
(14,307 )
Transfer
-
-
-
(25,000 )
-
Shares granted, Note 24 (b)
-
-
(2,392 )
-
-
Total contributions by and distributions to
owners recognized directly in equity
-
(11,915 )
-
(129,757 )
(119,064 )
As at 31 December 2021
(12,421 )
As at 1 January 2022
(12,421 )
Changes in equity for 2022
Profit for the year
-
-
-
-
Transactions with owners
Dividend distribution for 2021, Note 21 (e)
-
-
-
-
(84,649 )
(84,649 )
Purchase of treasury shares, Note 21 (b)
-
(10,850 )
-
-
-
(10,849 )
Shares granted, Note 24 (b)
-
-
(6,181 )
-
-
Transfer
-
-
-
(10,000 )
-
Share-based payments, Note 24 (b)
-
-
-
-
Parent-subsidiary merger, Note 15
-
-
-
-
Total contributions by and distributions to
owners recognized directly in equity
-
(4,669 )
-
(79,363 )
(80,213 )
As at 31 December 2022
(17,090 )
Annual report
240
Ericsson Nikola Tesla Group
Ericsson Nikola Tesla d.d.
Statement of cash flows
for the year ended 31 December 2022
2022
2021
Notes
HRK ‘000
HRK ‘000
Cash flows from operating activities
Profit before tax
Adjustments for:
Depreciation and amortization
7,12,13,29
Effects of lease derecognition
(3 )
Impairment losses and reversals
(310 )
(400 )
Gain on sale of property, plant and equipment
(584 )
(43 )
Net loss/(gain) on remeasurement of financial assets
(121 )
Amortization of discount
Interest income
(3,154 )
(3,741 )
Dividend income
(57,493 )
Interest expense
Foreign exchange (gain)/losses, net
(1,034 )
(4,651 )
Share-based payments
24 (b)
Changes in working capital:
In receivables
(39,902 )
In inventories
(44,869 )
In provisions
(1,524 )
In payables
Cash generated from operations
Interest paid
(1,113 )
(1,238 )
Income taxes paid
(9,188 )
(78 )
Net cash from operating activities
Cash flows from investing activities
Loans given
(7,535 )
Interest received
Dividends received
Proceeds from sale of property, plant and equipment
Purchases of property, plant and equipment, and intangible
assets
(12,838 )
(15,262 )
Deposits given to financial institutions, net
(1,208 )
Receipt of government grant
Net cash from/(used in) investing activities
(12,144 )
Annual report
241
Ericsson Nikola Tesla Group
Ericsson Nikola Tesla d.d.
Statement of cash flows (continued)
for the year ended 31 December 2022
2022
2021
Notes
HRK ‘000
HRK ‘000
Cash flows from financing activities
Repayment of borrowings
22
(26,189 )
(14,831 )
21 (b)
Purchase of treasury shares
(10,850 )
(14,307 )
21 (e)
Dividends paid
(84,751 )
(109,166 )
Payment of lease liabilities
29
(9,409 )
(11,697 )
Net cash used in financing activities
(131,199 )
(150,001 )
Effects of exchange rate changes on cash and cash equivalents
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
20
Annual report
242
Ericsson Nikola Tesla Group
Notes to the Financial Statements of Ericsson Nikola Tesla d.d.
1 Significant accounting policies
Reporting entity
Ericsson Nikola Tesla d.d. (the Company) is a
joint-stock company
incorporated and domiciled in Croatia . The address
of its registered office is Krapinska 45, 10000 Zagreb, the Republic of Croatia . The Company’s shares are listed on the
Public Joint-Stock Company listing on the Zagreb Stock Exchange. A summary of the Company’s principal accounting
policies is set out below.
Statement of compliance
The financial statements have been prepared in accordance with International Financial Reporting Standards adopted
by the European Union (IFRSs). These financial statements also comply with the Croatian Accounting Act in effect on
the date of issuing of these financial statements. These financial statements are a translation of the official statutory
IFRS financial statements.
Basis of preparation
The financial statements are prepared on the historical cost basis, with the exception of financial instruments which are
carried at fair value. These comprise derivative financial instruments and financial assets and liabilities at fair value
through profit or loss. Policies have been consistently applied to all the periods presented, unless otherwise stated (refer
to Note 2).
The preparation of financial statements in conformity with IFRSs requires management to make judgements, estimates
and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and
expenses. The estimates and associated assumptions are based on historical experience and various other factors that
are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements
about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ
from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognized in the period in which the estimate is revised if the revision affects only that period or in the period of revision
and future periods if the revision affects both current and future periods. Judgements made by the executive
management in the application of IFRSs that have significant effect on the financial statements and estimates are
discussed in Note 4.
The Company has issued these separate financial statements in accordance with Croatian regulations. The Company
has also prepared consolidated financial statements as at 31 December 2022 and for the year then ended in accordance
with IFRS for the Company and its subsidiaries (the Group), which were approved by the Management Board on 21 April
2023. In the consolidated financial statements, subsidiary undertakings (listed in Note 15) and those companies in which
the Group indirectly has an interest of more than half of the voting rights or otherwise has power to exercise control over
the operations have been fully consolidated. Users of these non-consolidated financial statements should read them
together with the Group’s consolidated financial statements as at and for the year ended 31 December 2022 in order to
obtain full information on the financial position, results of operations and changes in financial position of the Group as
a whole.
Going concern
The executive management have a reasonable expectation that the Company has adequate resources to continue in
operational existence for the foreseeable future. The Company therefore continues to adopt the going concern basis in
preparing its financial statements.
Functional and presentational currency
The Company’s financial statements have been prepared in Croatian kuna (HRK), which is the currency of the primary
economic environment in which the entity operates (‘the functional currency’) and the presentation currency have been
rounded to the nearest thousand. The closing exchange rate as at 31 December 2022 was HRK 7.064035 per USD 1
(2021: HRK 6.643548) and HRK 7.53450 per EUR 1 (2021: HRK 7.517174).
Annual report
243
Ericsson Nikola Tesla Group
Notes to the Financial Statements of Ericsson Nikola Tesla d.d. (continued)
1 Significant accounting policies
(continued)
Revenue recognition
IFRS 15 “Revenue from Contracts with Customers” is a principle-based model of recognizing revenue from customer
contracts.
It has a five-step model that requires revenue to be recognized when control over goods and services are transferred to
the customer.
The following paragraphs describes the types of contracts, when performance obligations are satisfied, and the timing
of revenue recognition. They also describe the normal payment terms associated with such contracts and the resulting
impact on the balance sheet over the duration of the contracts. The vast majority of the Company’s is for the sale of
standard products and services.
Standard solution
Products and services are classified as standard solutions if they do not require significant installation and integration
services to be delivered. Installation and integration services are generally completed within a short period of time, from
the delivery of the related products.
These products and services are viewed as separate distinct performance obligations. This type of customer contract is
usually signed as a frame agreement and the customer issues individual purchase orders to commit to purchases of
products and services over the duration of the agreement.
Revenue for standard products shall be recognized when control over the equipment is transferred to the customer at a
point in time. This assessment shall be viewed from a customer’s perspective considering indicators such as transfer of
titles and risks, customer acceptance, physical possession, and billing rights. Control of an asset therefore refers to the
ability to direct use of and obtain substantially all of the remaining benefits from the asset.
Furthermore, control includes the ability to prevent other entities from using and obtaining the benefits from an asset.
The benefits of an asset are the potential cash flows (inflows or savings in outflows) that can be obtained directly or
indirectly. For hardware sales, transfer of control is usually deemed to occur when the equipment arrives at the customer
site and for software sales, when the licenses are made available to the customer. Software licenses may be provided to
the customer at a point in time, activated or ready to be activated by the customer at a later stage, therefore revenue is
recognized when customer obtains control of the software.
Contractual terms may vary; therefore, judgment will be applied when assessing the indicators of transfer of control.
Revenue for installation and integration services is recognized upon completion of the service. Costs incurred in
delivering standard products and services are recognized as costs of sales when the related revenue is recognized in the
Income Statement.
Costs incurred relating to performance obligations not yet fully delivered are recognized as inventories.
Transaction prices under these contracts are usually fixed, and mostly billed upon delivery of the hardware or software
and completion of installation services. Customer finance agreements may be agreed separately with some customers
where payment terms exceed 179 days.
Revenue for recurring services such as customer support and managed services is recognized as the services are
delivered, generally pro-rata over time. Costs incurred in delivering recurring services are recognized as cost of sales as
they are incurred. Transaction prices under these contracts are billed over time, often on a quarterly basis.
Contract liabilities or receivables may arise depending on whether the quarterly billing is in advance or in arrears.
Contract for standard products and services applies to business in all segments.
Customized solution
Some products and services are sold together as part of a customized solution to the customer. This type of contract
requires significant installation and integration services to be delivered within the solution, normally over a period of
more than 1 year. These products and services are viewed together as a combined performance obligation. This type of
contract is usually sold as a firm contract in which the scope of the solution and obligations of both parties are clearly
defined for the duration of the contract.
Annual report
244
Ericsson Nikola Tesla Group
Notes to the Financial Statements of Ericsson Nikola Tesla d.d. (continued)
1 Significant accounting policies
(continued)
Revenue recognition (continued)
Customized solution (continued)
Revenue for the combined performance obligation shall be recognized over time if progress of completion can be reliably
measured and enforceable right to payment exists over the duration of the contract. The progress of completion is
estimated by reference to the output delivered such as achievement of contract milestones and customer acceptance.
This method determines revenue milestones over the duration of the contract, and it is considered appropriate as it
reflects the nature of the customized solution and how integration service is delivered in these projects.
If the criteria above are not met, then all revenue shall be recognized upon the completion of the customized solution,
when final acceptance is provided by the customer. Costs incurred in delivering customized solutions are recognized as
costs of sales when the related revenue milestone is recognized in the Income Statement. Costs incurred relating to
future revenue milestones are recognized as Inventories and assessed for recoverability on a regular basis.
Transaction price under these contracts is usually a fixed fee, split into a number of progress payments or billing
milestones as defined in the contract. In most cases, revenue recognized is limited to the progress payments or
unconditional billing milestones over the duration of the contract, therefore no contract asset or contract liability arises
on these contracts.
Customer finance agreements may be agreed separately with some customers where payment terms exceed 365 days.
Contract for customized solution applies to the Industry and Society business, Business Support Systems (BSS) business,
within the segment Digital Services, and the Media Solutions business within the segment Emerging Business and Other.
Right to use (RTU)
The nature of Ericsson’s promise is to provide a right to use Ericsson’s IP as it exists (in terms of form and functionality)
at the point in time at which the license is granted to the customer. This means that the customer can direct the use of,
and obtain substantially all the remaining benefits from, the license at the point in time at which the license transfers.
Customer contract related balances
Trade receivables include amounts that have been billed in accordance with customer contract terms and amounts that
the Company has an unconditional right to, with only passage of time before the amounts can be billed in accordance
with the customer contract terms.
Customer finance credits arise from credit terms exceeding 179 days in the customer contract or a separate financing
agreement signed with the customer. Customer finance is a class of financial assets that is managed separately from
receivables. See note 31 (d) for further information on credit risk management of trade receivables and customer finance
credits.
In accordance with IFRS 15, where significant financing is provided to the customer, revenue is adjusted to reflect the
impact of the financing transaction. These transactions could arise from the customer finance credits above if the
contracted interest rate is below the market rate or through implied financing transactions due to payment terms of more
than one year from the date of transfer of control. The Company has elected to use the practical expedient not to adjust
revenue for transactions with payment terms, measured from the date of transfer of control, of one year or less.
Contract asset is unbilled sales amount relating to performance obligation that has been satisfied under customer
contract but is conditional on terms other than only the passage of time before payment of the consideration is due.
Under previous standards these unbilled sales balances have been included within trade receivables.
Contract liability relates to amounts that are paid by or due from customers for which performance obligations are
unsatisfied or partially satisfied. Under previous standards these balances have been disclosed as deferred revenue
within other current liabilities, and the Company concluded that the balances meet the definition of contract liability
under IFRS 15. Advances from customers are also included in the contract liability balance.
Annual report
245
Ericsson Nikola Tesla Group
Notes to the Financial Statements of Ericsson Nikola Tesla d.d. (continued)
1 Significant accounting policies
(continued)
Property, plant and equipment
Items of property, plant and equipment are shown at cost or deemed cost, less accumulated depreciation and
impairment losses.
The Company recognizes in the carrying amount of an item of property, plant and equipment the cost of replacing part
of such an item when that cost is incurred if it is probable that the future economic benefits embodied with the item will
flow to the Company and the cost of the item can be measured reliably. All other expenditure on repairs and maintenance
is expensed as incurred. Where parts of an item of property, plant and equipment have different useful lives, they are
accounted for as separate items of property, plant and equipment.
Land is not depreciated. Depreciation on other assets is provided on a straight-line basis to allocate their cost over the
estimated economic useful life of the assets. The estimated useful lives are as follows:
Useful lives
Bulidings
5 – 30 years
Plant and equipment
2 – 10 years
Other
5 – 7 years
The depreciation method, useful lives and residual values are reviewed, and adjusted if appropriate, at each balance
sheet date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying
amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing
proceeds with carrying amount and are included in the statement of comprehensive income.
Intangible assets
Intangible assets are stated on initial recognition at cost and subsequently at cost less accumulated amortization and
impairment losses.
Amortization is provided on a straight-line basis over the estimated useful lives of intangible assets. Intangible assets
include acquired computer software and are amortized on a straight-line basis over their useful life of 2-4 years. Cost
associated with maintaining computer software is recognized as an expense as incurred.
Impairment of non-financial assets
Assets that have an indefinite useful life (such as goodwill) are not subject to amortization and are tested annually for
impairment. Assets that are subject to amortization and depreciation are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized
for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the
higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are
grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial
assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each
reporting date.
Annual report
246
Ericsson Nikola Tesla Group
Notes to the Financial Statements of Ericsson Nikola Tesla d.d. (continued)
1 Significant accounting policies
(continued)
Financial assets at amortized cost
Financial assets are classified as amortized cost if the contractual terms give rise to payments that are solely payments
of principal and interest on the principal amount outstanding and the financial asset is held in a business model whose
objective is to hold financial assets in order to collect contractual cash flows. These assets are subsequently measured
at amortized cost using the effective interest method, less impairment allowances. Interest income and gains and losses
from financial assets at amortized cost are recognized in financial income.
Financial assets at fair value through profit or loss (FVTPL)
A financial asset is classified as held for trading if it is acquired principally for the purpose of selling in the near term.
Derivatives are classified as held for trading, unless they are designated as hedging instruments for the purpose of hedge
accounting. Assets held for trading are classified as current assets. Debt instruments classified as FVTPL, but not held
for trading, are classified on the balance sheet based on their maturity date (i.e. those with a maturity longer than one
year are classified as non-current). Investments in shares and participations are classified as FVTPL and classified as
non-current financial assets. Gains or losses arising from changes in the fair values of the FVTPL category (excluding
derivatives and customer financing) are presented in the income statement within financial income in the period in which
they arise. Gains and losses on derivatives are presented in the income statement as follows.
Gains and losses on derivatives that hedge foreign exchange risks are presented as net foreign exchange gains and
losses. Gains and losses on customer financing are presented in the income statement as selling expenses. Dividends are
recognised as other income in profit or loss when the right to receive payment is established.
Cash and cash equivalents
Cash comprises cash held at banks and on hand. Cash equivalents include demand deposits and time deposits with
maturities up to three months. Cash and cash equivalents are carried at amortized cost because: (i) they are held for
collection of contractual cash flows and those cash flows represent solely payments of principal and interest, and (ii)
they are not designated at fair value through profit and loss.
Impairment of cash, trade receivables and contract assets
Financial assets affected by the new model are cash and cash equivalents, deposits, trade receivables and contract
assets.
Two unified models were developed for relatable financial assets. Cash equivalents and deposits are assessed for
impairment under one unified model and trade receivables and contract assets are assessed for impairment under
another unified model.
Cash equivalents and deposits are assessed based on probability of default as well as the Company’s exposure to certain
financial institution at the time of default. To determine probability of default, country credit rating of financial institution
is used, as well as the rating of future outlook.
Expected loss on cash, cash equivalents and deposits for each financial institution gives the total expected credit loss.
There were no significant changes to the model during the year. The Company has determined that credit risk largely
depends on both the payment pattern of the customer as well as the risk in the country where the customer resides (e.g.
ability to make cross-border payments).
Annual report
247
Ericsson Nikola Tesla Group
Notes to the Financial Statements of Ericsson Nikola Tesla d.d. (continued)
1 Significant accounting policies
(continued)
Impairment of cash, trade receivables and contract assets (continued)
Therefore, expected credit losses (ECLs) are calculated using a provision matrix that specifies a fixed rate depending
both on the number of days past due and the country risk rating. The country risk ratings depend on the ratings used by
all Export Credit Agencies within the OECD. The rates defined in the provision matrix are based on historical loss patterns
for certain portfolio of customers. Each customer is regulatory monitored and these rates are adjusted for current
conditions as well as management expectations for changes to political risks and payment patterns of certain customer
in the future. There were no significant changes to the model during the year.
Trade and other payables
Trade and other payables are initially recognized at fair value and subsequently measured at amortized cost using the
effective interest rate.
Financial liabilities
Financial liabilities are recognized when the Company becomes bound to the contractual obligations of the instrument.
Financial liabilities are derecognized when they are extinguished, i.e. when the obligation specified in the contract is
discharged, cancelled or expires.
Inventories
Inventories are stated at the lower of cost and net realizable value. Net realizable value is the estimated selling price in
the ordinary course of business, less the estimated costs of completion and selling expenses. The cost of other inventories
is based on the First In First Out (FIFO) principle and includes expenditures incurred in acquiring the inventories and
bringing them to their existing location and condition. In case of manufactured inventories, the cost includes materials,
labor and related overhead, and expenditure incurred in acquiring the inventories and bringing them to their existing
location and condition. Slow-moving and obsolete inventories have been written down to their estimated realizable
value.
Share capital
Share capital is stated in HRK at nominal value.
Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction,
net of tax, from the proceeds. Where the Company purchases its own equity share capital (treasury shares), the
consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity
attributable to the Company’s equity holders until the shares are cancelled or reissued. Where such ordinary shares are
subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the
related income tax effects, is included in equity attributable to the Company’s equity holders.
Annual report
248
Ericsson Nikola Tesla Group
Notes to the Financial Statements of Ericsson Nikola Tesla d.d. (continued)
1 Significant accounting policies
(continued)
Income tax
The tax expense for the period is based on taxable profit for the year and comprises current and deferred tax. Income
tax is recognized in the statement of comprehensive income except to the extent that it relates to items recognized
directly in equity, in which case it is recognized in equity. The current income tax charge is calculated on the basis of the
tax laws enacted or substantively enacted at the balance sheet date in the countries where the company and its
subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns
with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where
appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is recognized by using the balance sheet liability method on temporary differences arising between
tax basis of assets and liabilities and their carrying amount in the financial statements. However, the deferred income
tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business
combination that at the time of the transaction does not affect either accounting or taxable profit or loss. Deferred tax
assets and liabilities are not discounted and are classified as non-current assets and/or liabilities in the balance sheet.
Deferred tax assets are recognized when it is probable that sufficient taxable profits will be available against which the
deferred tax assets can be utilized. At each balance sheet date, the Company reassesses unrecognized deferred tax
assets and the carrying amount of deferred tax assets.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets and
liabilities are measured by using the tax rates expected to apply to taxable profit in the years in which those temporary
differences are expected to be recovered or settled based on tax rates enacted or substantially enacted at the balance
sheet date.
The measurement of deferred tax liabilities and deferred tax assets reflects the tax consequences that would follow from
the manner in which the enterprise expects, at the balance sheet date, to recover or settle the carrying amount of its
assets and liabilities.
Foreign currencies
Transactions denominated in foreign currencies are translated into HRK at the rate prevailing at the date of the
transaction. Monetary assets and liabilities denominated in foreign currency at the balance sheet date have been
translated to HRK at the foreign exchange rate ruling at that date. Foreign exchange differences arising from translation
are included in the statement of comprehensive income. Non-monetary assets and liabilities denominated in foreign
currencies that are stated at fair value are translated to HRK at foreign exchange rates ruling at the dates the values
were determined.
Non-monetary assets and items that are measured in terms of “historical cost of a foreign currency” are not retranslated.
Annual report
249
Ericsson Nikola Tesla Group
Notes to the Financial Statements of Ericsson Nikola Tesla d.d. (continued)
1 Significant accounting policies
(continued)
Employee benefits
a) Long-term service benefits
The Company provides employees with jubilee and one-off retirement awards. The obligation and costs of these benefits
are determined by using the Projected Unit Credit Method. The Projected Unit Credit Method considers each period of
service as giving rise to an additional unit of benefit entitlement and measures each unit separately to build up the final
obligation. The obligation is measured at the present value of estimated future cash flows using a discount rate that is
similar to the interest rate on government bonds where the currency and terms of the government bonds are consistent
with the currency and estimated terms of the benefit obligation.
b) Share-based payments
The Company operates an equity-settled, share-based compensation plan allowing the Company’s employees to receive
shares. The fair value of the employee services received in exchange for the grant of the Company’s shares is recognized
as an expense with a corresponding increase in equity. The fair value is measured at grant date and spread over the
period during which the employees become unconditionally entitled to the shares. The total amount to be expensed over
the vesting period is determined by reference to the fair value of the shares granted. At each balance sheet date, the
Company revises its estimates of the number of shares that are expected to become granted. It recognizes the impact of
the revision of original estimates, if any, in the statement of comprehensive income, with a corresponding adjustment to
equity. When distributed upon vesting date, treasury shares are credited at average purchase cost and recorded against
retained earnings.
c)
Bonus plans
The Company recognizes a liability and an expense for bonuses as a provision where contractually obliged or where
there is past practice that has created a constructive obligation.
Provisions
A provision is recognized when the Company has a present obligation (legal or constructive) as a result of a past event
and it is probable (i.e. more likely than not) that an outflow of resources embodying economic benefits will be required
to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Provisions are reviewed at
each balance sheet date and adjusted to reflect the current best estimate. The most significant provisions in the financial
statements are provisions for warranty claims, penalty claims and litigation. If the effect is material and if the obligation
is expected to be settled in a period of over 12 months, provisions are determined by discounting the expected future
cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate,
the risks specific to the liability. A provision for warranties is recognized when the underlying products or services are
sold. The provision is based on historical warranty data and a weighting of all possible outcomes against their associated
probabilities. The increase in the provision due to passage of time is recognized as interest expense.
Interest income
Interest income is recognized using the effective interest method. When a loan and receivable is impaired, the company
reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original
effective interest rate of the instrument and continues unwinding the discount as interest income. Interest income on
impaired loan and receivables is recognized using the original effective interest rate.
Annual report
250
Ericsson Nikola Tesla Group
Notes to the Financial Statements of Ericsson Nikola Tesla d.d. (continued)
1 Significant accounting policies
(continued)
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing
performance of the operating segments, has been identified as the Management Board that makes strategic decisions.
Borrowings
Borrowings are initially recognized at fair value, net of transaction costs incurred. Borrowings are subsequently stated
at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized
in the statement of comprehensive income over the period of the borrowings using the effective interest method.
Government grants
Grants from the government are recognized within “Other operating income” at their fair value where there is reasonable
assurance that the grant will be received, and the Company will comply with all attached conditions.
Government grants relating to costs are deferred and recognized over the period necessary to match them with the costs
that they are intended to compensate.
Grants relating to property, plant and equipment are recognized in profit or loss over the periods and in the proportions
in which depreciation on those assets is recognized. In statement of financial position, government grant is deducted in
arriving at the carrying amount of the underlying asset and is recognized in the profit or loss over the useful life of
depreciable asset by way of a reduced depreciation charge.
Dividend distribution
Dividend distribution to the Company’s shareholders is recognized as a liability in the Company’s financial statements in
the period in which the dividends are approved by the Company’s shareholders.
Investments in subsidiaries
Investments in subsidiaries in which the Company has an interest of more than one half of the voting rights or otherwise
has power to exercise control over the operations are recorded at cost less impairment losses, if any. Impairment is tested
annually whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
Investments in subsidiaries for which an impairment loss has been recorded are tested at each reporting date for a
potential reversal of impairment.
Dividend income is recognized when the right to receive payment is established.
Annual report
251
Ericsson Nikola Tesla Group
Notes to the Financial Statements of Ericsson Nikola Tesla d.d. (continued)
1 Significant accounting policies
(continued)
Leases
As a lessee
As a lessee, the Company leases property and vehicles. Under IFRS 16, the Company recognizes right
‑of‑use assets and
lease liabilities for most of these leases – i.e. these leases are on balance sheet.
‑
At commencement or on modification of a contract that contains a lease component, the Company allocates the
consideration in the contract to each lease component based on its relative stand alone price.
‑
However, for leases of property the Company has elected not to separate non lease components and account for the
‑
lease and associated non lease components as a single lease component.
‑
The Company uses a number of practical expedients when applying IFRS 16 to leases. In particular, the Company:
-
does not recognize right-of-use assets and liabilities for leases for which the lease term ends within 12 months
of the date of initial application;
-
does not recognize right-of-use assets and liabilities for leases of low value assets; and
-
excludes initial direct costs from the measurement of the right-of-use asset at the date of initial application.
When measuring lease liabilities for leases that were classified as operating leases, the Company discounted lease
payments using its incremental borrowing rate, the weighted‑average rate applied is 2.5%.
As a lessor
The Company leases out its own property and the Company has classified these leases as operating leases.
The Company sub-leases some of its properties. Under IFRS 16, the right-of-use assets recognized from the head leases
are presented in investment property and measured at fair value at that date. The Company assessed the classification
of the sub-lease contracts with reference to the right-of-use asset rather than the underlying asset and concluded that
they are operating leases under IFRS 16.
The Company has applied IFRS 15 Revenue from Contracts with Customers to allocate consideration in the contract to
each lease and non-lease component.
Annual report
252
Ericsson Nikola Tesla Group
Notes to the Financial Statements of Ericsson Nikola Tesla d.d. (continued)
2 Changes in accounting policies
There were no changes in accounting policies for the financial year ending as at 31 December 2022 in comparison with
prior reporting period.
3 New accounting standards and
interpretations
New standards and amendments to existing not yet adopted.
A number of new standards are effective for annual periods beginning after 1 January 2022 and earlier application is
permitted, however, the Company has not early adopted the new or amended standards in preparing these financial
statements.
Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12)
The amendments narrow the scope of the initial recognition exemption to exclude transactions that give rise to equal
and offsetting temporary differences - e.g. leases. The amendments apply for annual reporting periods beginning on or
after 1 January 2023. For leases, the associated deferred tax asset and liabilities will need to be recognised from the
beginning of the earliest comparative period presented, with any cumulative effect recognised as an adjustment to
retained earnings or other components of equity at that date. For all other transactions, the amendments apply to
transactions that occur after the beginning of the earliest period presented.
The Company is currently evaluating the effects of these amendments, but does not expect that the amendment will
have an effect on the Company's retained earnings.
Annual report
253
Ericsson Nikola Tesla Group
Notes to the Financial Statements of Ericsson Nikola Tesla d.d. (continued)
4 Critical accounting estimates and
judgements
Accounting estimates and judgements are continually evaluated and are based on historical experience and other
factors, including expectations of future events that are believed to be reasonable under the circumstances. The
Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by
definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing
a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
(a) Impairment losses on loans and receivables
The Company reviews its receivables to assess impairment on a monthly basis. In determining whether an impairment
loss should be recorded in the statement of comprehensive income, the Company makes judgements as to whether there
is any observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio
of loans and receivables before the decrease can be identified with an individual loan or receivable in that portfolio. This
evidence may include observable data indicating that there has been an adverse change in the payment status of
borrowers in a group, or national or local economic conditions that correlate with parameters relevant to assets in the
Company.
(b)
Derecognition of receivables with off-balance sheet financing
In 2016, the Company entered into several new customer contracts in the foreign market. The contracts include delivery
of equipment and sale of services with 15% up-front payment while remaining 85% have deferred payment terms up to
54 months.
The Company financed the sale of equipment through a Supplier credit arrangement. The arrangement includes:
(i) matching cash receipts from customer with payments to the bank, (ii) assignation of insurance policy to the bank, and
(iii) ceding future cash receipts from the customer to the bank through special purpose accounts secured by special
purpose deposits (Note 14).
By transferring to the bank its contractual right to receive the cash flows, the Company transferred the financial asset to
the bank. In terms of derecognition criteria, the Company analyzed transfer of risk and rewards of the receivable,
specifically related to credit risk and late payment risk.
The credit risk is shifted from international customer to the risk from domestic insurance company default which is
considered as significant transfer in credit risk. The Company issued guarantees to the financing bank for risk of non-
performance by the insurance company which is disclosed in Note 23. The issued guarantee for non-performance of the
insurance company is recognized initially at fair value and subsequently at the higher of the unamortized balance of the
initial fair value and the best estimate of expenditure required to settle the obligation under the guarantee.
Late payment risk was transferred based on the fact that the special purpose deposit covers the late payment charges
and/or history of payments with the customer do not historically evidence late payment risk as substantial to the
agreement.
Having transferred the right to cash flows and substantially all the risk and rewards relating to 90% of receivables,
management concluded that it was appropriate to derecognize 90% of the related receivables from the balance sheet.
The remaining 10% of the receivables remain on the balance sheet as long-term receivables from the customer (Note
14) and a 10% of the related financing liability to the bank is recorded as borrowings (Note 22).
Annual report
254
Ericsson Nikola Tesla Group
Notes to the Financial Statements of Ericsson Nikola Tesla d.d. (continued)
4 Critical accounting estimates and
judgements (continued)
(c) Revenue recognition
The Company uses estimates and judgments in determining the amount and timing of revenue under IFRS 15,
particularly when determining the transaction price and its allocation to performance obligations identified under the
contract.
Transaction price may consist of variable elements such as discounts and contract penalties. Transaction price, including
variable considerations, is estimated at the commencement of the contract (and periodically thereafter). Judgment is
used in the estimation process based on historical experience with the type of business and customer.
IFRS 15 also requires revenue to be allocated to each performance obligations by reference to their stand-alone selling
prices. The Company considers that an adjusted market assessment approach should be used to estimate stand-alone
selling prices for its products and services for the purposes of allocating transaction price. These estimates are comprised
of prices set for similar customer and circumstances, adjusted to reflect appropriate profit margins for the market.
Estimates are used to determine discounts that relate specifically to each performance obligations, thus impacting their
stand-alone selling prices.
The Management applies judgment when assessing the customer’s ability and intention to pay in a contract. The
assessment is based on the latest customer credit standing and the customer’s past payment history. This assessment
may change during the contract execution, and if there is evidence of deterioration in the customer’s ability or intention
to pay, then under IFRS 15 no further revenue shall be recognized until the collectability criteria is met. Conversely, this
assessment may
also change favorably over time, upon which revenue shall now be recognized on a contract that did not initially meet
the collectability criteria.
Revenue for standard products shall be recognized when control over the equipment is transferred to the customer at a
point in time. This assessment shall be viewed from a customer’s perspective considering indicators such as transfer of
titles and risks, customer acceptance, physical possession, and billing rights.
Control of an asset therefore refers to the ability to direct use of and obtain substantially all the remaining benefits from
the asset. Control includes the ability to prevent other entities from using and obtaining the benefits from an asset. The
benefits of an asset are the potential cash flows (inflows or savings in outflows) that can be obtained directly or
indirectly. Judgment may be applied in determining whether risk and rewards have been transferred to the customer
and whether the customer has accepted the products. In a sale of software license, judgment may also be applied to
determine when the software is made available to the customer by considering when they can direct the use of, and
obtain substantially all the benefits of, the license. Often all indicators of transfer of control are assessed together and
an overall judgment formed as to when transfer of control has occurred in a customer contract.
Revenue for customized solutions shall be recognized over time if progress of completion can be reliably measured and
enforceable right to payment exists over the duration of the contract. The progress of completion is estimated by
reference to the output delivered such as achievement of contract milestones and customer acceptance. Judgment are
applied when determining the appropriate revenue milestones that best reflect the progress of completion and are
aligned with key acceptance stages within the contract.
Annual report
255
Ericsson Nikola Tesla Group
Notes to the Financial Statements of Ericsson Nikola Tesla d.d. (continued)
5 Sales revenue
Analysis of revenue by category:
2
2022
2021
0
HRK ‘000
HRK ‘000
HRK ‘000
HRK ‘000
HRK ‘000
HRK ‘000
At a point in
At a point in
time
Over time
time
Over time
Sales revenue from
products
332,892
315,612
17,280
350,490
296,739
53,751
Sales revenue from
services
1,328,455
1,181,496
146,959
1,172,136
1,051,720
120,416
1,661,347
1,497,108
164,239
1,522,626
1,348,459
174,167
6 Segment reporting
The Company has determined the operating segments based on the reports reviewed by the Management Board that
are used to make strategic decisions. The Management Board assesses the performance of the operating segments
based on a measure of adjusted Operating profit. The measurement basis excludes the effects of administration
expenses.
When determining the operating segments, the Company has looked at which market and to what type of customers
the Company’s products are aimed, and through what distribution channels they are sold, as well as to commonality
regarding technology, research and development.
To best reflect the business focus and to facilitate comparability with the Ericsson Group, four operating segments are
reported:
Networks include radio and transport solutions with supporting services, based on industry standards and offered
–
via scalable modular platforms. The portfolio enables customers to evolve their telecom networks across generations to
5G.
–
Digital Services include products and services providing solutions for our Telecom and Industry & Society customers’
digital transformation journeys across the support systems BSS and OSS, Telecom Core, and IT Cloud domains through
a combination of products, technology and expertise in networks, software, cloud, and business processes.
Managed Services are offered in three main areas: Networks, IT, and Network Design & Optimization.
–
Other includes products and services that enable content owners, broadcasters, TV service providers and network
–
operators to efficiently deliver, manage and monetize new TV experiences. In addition, segment Other includes iconectiv
and emerging business such as Internet of Things and Unified Delivery Network (UDN).
The Management Board does not monitor assets and liabilities by segments and therefore this information is not
disclosed.
Annual report
256
Ericsson Nikola Tesla Group
Notes to the Financial Statements of Ericsson Nikola Tesla d.d. (continued)
6 Segment reporting (continued)
Revenues determined based on the geographic location of customers are disclosed in this note. All the Company’s assets
are located in Croatia.
2022
2021
HRK ‘000
HRK ‘000
HRK ‘000
HRK ‘000
HRK ‘000
HRK ‘000
At a point in
At a point in
time
Over time
time
Over time
Sales revenue in domestic
market
441,218
340,254
100,964
412,192
291,186
121,006
Sales revenue in former
CIS countries
102,382
73,645
28,737
118,585
97,831
20,754
Sales revenue to Ericsson
1,018,096
1.018,096
-
895,268
895,268
-
Sales revenue in Bosnia
and Herzegovina,
Montenegro
and Kosovo
87,314
57,475
29,839
73,486
44,222
29,264
Other export sales
revenue
12,337
7,638
4,699
23,095
19,952
3,143
1,661,347
1,497,108
164,239
1,522,626
1,348,459
174,167
Networks
Digital services Managed services
Other
Unallocated
Total
2022
2021
2022 2021 2022 2021
2022 2021
2022 2021
2022
2021
HRK ‘000 HRK ‘000 HRK ‘000 HRK ‘000HRK ‘000 HRK ‘000 HRK ‘000 HRK ‘000 HRK ‘000 HRK ‘000 HRK ‘000 HRK ‘000
Sales revenue
993,657 920,767 637,594 576,430 26,794
19,715
3,302
5,714
-
-
1,661,347 1,522,626
Timing of
revenue
recognition
At a point in
time
906,064 809,274 560,948 513,820 26,794
19,651
3,302
5,714
-
-
1,497,108 1,348,459
Over time
87,593 111,493
76,646 62,610
-
64
-
-
-
-
164,239 174,167
Operating profit
152,401 90,899
30,799 57,937
3,246
1,238
277
435 (41,819) (39,965)
144,904 110,544
Finance income/(expense), net
4,105
2,748
Profit before tax
149,009
85,240
Income tax
(1,490) (8,749)
Profit for the
year
147,519 115,207
Annual report
257
Ericsson Nikola Tesla Group
Notes to the Financial Statements of Ericsson Nikola Tesla d.d. (continued)
7 Expenses by nature
Cost of sales, selling expenses and administrative expenses consist of the following expenses by nature:
2022
2021
HRK ‘000
HRK ‘000
Changes in contract work in progress (Note 16)
54,968
(44,869)
Material and external services (1)
591,957
573,720
Personnel expenses (Note 8)
931,454
860,593
Depreciation and amortization (Notes 12, 13, 29)
36,613
45,171
1,614,993
1,434,615
(1) Including fees to auditors of HRK 472 thousand (2021: HRK 417 thousand). Fees to auditors mainly relate to statutory
audit services.
Other operating income
Other operating income consists of income from profit of daughter companies in total amount of HRK 57,493 thousand,
rent income in total amount of HRK 33,038 thousand (2021: HRK 16,961 thousand), and other in total amount of HRK
8,235 thousand (2021: HRK 5,957 thousand).
8 Personnel expenses
2022
2021
HRK ‘000
HRK ‘000
Net salaries
525,920
490,300
Taxes and contributions
330,513
315,363
Other payroll-related costs
67,510
50,526
Equity-settled transactions (Note 24 (b))
7,511
4,405
931,454
860,593
Personnel expenses include HRK 142,065 thousand (2021: HRK 134,990 thousand) of defined pension contributions
paid or payable into obligatory pension plans. Contributions are calculated as a percentage of employees’ gross salaries
(Gross I).
Other payroll-related costs relate to transportation expenses, vacation accrual cost and other personnel provisions as
well as to termination benefits that amount HRK 1,695 thousand (2021: HRK 5,471 thousand).
As at 31 December 2022, total number of employees was 2,733 (2021: 2,669).
Annual report
258
Ericsson Nikola Tesla Group
Notes to the Financial Statements of Ericsson Nikola Tesla d.d. (continued)
9 Finance income/(expense), net
2022
2021
HRK ‘000
HRK ‘000
Interest income
3,154
3,741
Net foreign exchange gain
3,997
5,768
Net change in fair value of financial assets at fair value through profit and loss
-
121
Finance income
7,151
9,630
Interest expense
(1,121)
(1,091)
Net change in fair value of financial assets at fair value through profit and loss
(1,923)
-
Amortisation of discount
(1)
(51)
Finance expense
(3,046)
(1,142)
Finance income/(expense), net
4,105
8,488
10 Income tax expense
Income tax has been calculated on the taxable income at statutory tax rate of 18% (2021: 18%). Income tax expense
recognized in the statement of comprehensive income comprises:
2022
2021
HRK ‘000
HRK ‘000
Current income tax expense
(8,699)
(7,983)
4,158
Total deferred tax income/(expense)
7,209
Total income tax expense
(1,490)
(3,825)
Annual report
259
Ericsson Nikola Tesla Group
Notes to the Financial Statements of Ericsson Nikola Tesla d.d. (continued)
10 Income tax expense
(continued)
Effective tax rate reconciliation
The reconciliation between tax expense and accounting profit is shown as follows:
2022
2021
HRK ‘000
HRK ‘000
Profit before tax
149,009
119,032
Tax calculated at domestic tax rates applicable to profits in the respective
26,822
21,426
countries
Tax effects of:
Permanent non-deductible expenses
(10,197)
53
Effects of temporary differences
36
-
Tax incentives
(15,171)
(17,654)
Tax charge
1,490
3,825
Effective tax rate
1.0%
3.2%
Tax incentives totaling HRK 15,171 thousand (2021: HRK 17,654 thousand) include tax allowances for certain
expenditure, as employment and education and training, as defined by Croatian tax legislation. The underlying
expenditure is included in cost of sales.
The Croatian Income Tax Act is subject to different interpretations and changes in respect of certain expenses which
reduce the tax base. The Management Board’s interpretation of the law relating to these transactions and activities of
the Company may be disputed by the relevant authorities. The Tax Authority may take a different view in interpreting
the laws and judgments, and it is possible that those transactions and activities that have not been disputed in the past
may be disputed now. The Tax Authority may carry out a tax audit within three years from the year in which the income
tax liability for a certain financial period was established.
Annual report
260
Ericsson Nikola Tesla Group
Notes to the Financial Statements of Ericsson Nikola Tesla d.d. (continued)
10 Income tax expense (continued)
Deferred tax from other temporary differences
The Company recognized deferred tax assets in the amount of HRK 19,763 thousand (2021: HRK 12,555 thousand)
relating to temporary differences arising from:
Accrued interest expenses
–
–
Impairment of receivables
Accrued expenses from contracts
–
Warranty provisions
–
Provisions for jubilee awards and retirement
–
–
Right of use asset and lease liabilities
Impairments, provisions and accrued expenses
HRK ‘000
As at 1 January 2021
8,397
Tax credited to the Income statement
5,424
Tax charged to the Income statement
(1,266)
As at 31 December 2021
12,555
As at 1 January 2022
12,555
Tax credited to the Income statement
9,528
Tax charged to the Income statement
(2,320)
As at 31 December 2022
19,763
11 Earnings per share
2022
2021
Profit for the year (HRK ‘000)
147,519
115,207
Weighted Average Number of Shares
1,323,376
1,330,723
Earnings per share (HRK)
111
87
Basic and fully diluted earnings per share are the same since the Parent Company does not have any dilutive potential
ordinary shares.
Annual report
261
Ericsson Nikola Tesla Group
Notes to the Financial Statements of Ericsson Nikola Tesla d.d. (continued)
12 Property, plant and equipment
Land and
Plant and Asset under
buildings
equipment construction
Other
Total
HRK ‘000
HRK ‘000
HRK ‘000 HRK ‘000
HRK ‘000
As at 1 January 2021
Cost
177,232
336,705
31,854
327
546,118
Accumulated depreciation
(129,550)
(267,606)
-
(275)
(397,431)
Net book amount
47,682
69,099
31,854
52
148,687
Year ended 31 December 2021
Opening net book amount
47,682
69,099
31,854
52
148,687
Transfer of asset under construction
30,667
1,482
(32,149)
-
-
Additions
1,078
12,966
513
-
14,557
Disposals
-
(305)
-
-
(305)
Depreciation charge
(4,219)
(29,333)
-
(7)
(33,559)
Closing net book amount
75,208
53,909
218
45
129,380
As at 31 December 2021
Cost
208,977
250,199
218
327
459,721
Accumulated depreciation
(133,769)
(196,290)
-
(282)
(330,341)
Net book amount
75,208
53,909
218
45
129,380
Year ended 31 December 2022
Opening net book amount
75,208
53,909
218
45
129,380
Transfer of asset under construction
25
185
(210)
-
-
Additions
280
12,324
1,772
-
14,376
Disposals
-
(6)
-
(13)
(19)
Depreciation charge
(4,488)
(22,131)
-
(7)
(26,626)
Closing net book amount
71,025
44,281
1,780
25
117,111
As at 31 December 2022
Cost
209,031
209,902
1,780
135
420,839
Accumulated depreciation
(138,006)
(165,.621)
-
(110)
(303,737)
Net book amount
71,025
44,281
1,780
25
117,111
to future equipment purchases.
The Company acts as a lessor under operating leases, mainly in respect of land and buildings. Property leased to others with
a carrying value of HRK 6,443 thousand (2021: HRK 7,366 thousand) is included within land and buildings. These assets are
depreciated at the same depreciation rates as other buildings. Subsequent renewals are negotiated with the lessee. No
contingent rents are charged. Portions of the property which is held for rental could not be sold separately or leased out
separately under finance lease. Consequently, the IAS 40 criteria for separate investment property recognition are not met.
Annual report
262
Ericsson Nikola Tesla Group
Notes to the Financial Statements of Ericsson Nikola Tesla d.d. (continued)
13 Intangible assets
Application
software
HRK ‘000
As at 1 January 2021
Cost or valuation
3,348
Accumulated amortization
(3,001)
Net book amount
347
Year ended 31 December 2021
Opening net book amount
347
Additions
852
Amortization charge
(119)
Closing net book amount
1,080
As at 31 December 2021
Cost or valuation
4,200
Accumulated amortization
(3,120)
Net book amount
1,080
Year ended 31 December 2022
Opening net book amount
1,080
Additions
-
Amortization charge
(403)
Closing net book amount
677
As at 31 December 2022
Cost or valuation
4,144
Accumulated amortization
(3,467)
Net book amount
677
Annual report
263
Ericsson Nikola Tesla Group
Notes to the Financial Statements of Ericsson Nikola Tesla d.d. (continued)
14 Loans and receivables
2022
2021
HRK ‘000
HRK ‘000
Deposits with financial institutions, denominated in foreign currency
6,594
7,295
Deposits with financial institutions, denominated in HRK
5,200
9,200
Non-current receivables from foreign customers, denominated in foreign currency
-
77
Loans given, Note 4 (b)
3,768
5,052
Receivables for sold apartments
359
369
Total loans and receivables
15,921
21,993
Impairment allowance on loans and receivables
(104)
(17)
15,817
21,976
Deposits with financial institutions in the amount of HRK 10,714 thousand (2021: 14,701 thousand) are used as a
collateral for Supplier credit arrangement and performance guarantees disclosed in Note 4 (b), with interest rate from
0% to 0.45% and maturing in year 2026.
The remainder of the deposits with financial institutions in the amount of HRK 1,080 thousand (2021: HRK 1,794
thousand) are placed as guarantee deposits for housing loans provided to the employees, and with a remaining maturity
of over three years.
Loans and receivables from customers are partially secured with bank guarantees and letters of credit. The current
portion of the non-current receivables is classified under current assets.
Receivables for sold apartments are linked to the counter value of euro, repayments are made by deduction from monthly
salary and the loans are secured with collateral on the house or apartment. Receivables for sold apartments and housing
loans provided to a limited number of employees bear fixed interest rates of up to 5% per annum.
Non-current portion of foreign and domestic loans and receivables from customers
2022
2021
Due
HRK ‘000
HRK ‘000
2023
-
4,458
2024
2,801
671
2025
967
-
3,768
5,129
Annual report
264
Ericsson Nikola Tesla Group
Notes to the Financial Statements of Ericsson Nikola Tesla d.d. (continued)
15Investments in subsidiaries
2022
2021
Ownership
HRK ‘000
HRK ‘000
Ericsson Nikola Tesla BY d.o.o.
100%
1,020
1,020
Ericsson Nikola Tesla Servisi d.o.o.
100%
20
20
Libratel d.o.o
100%
5
5
Ericsson Nikola Tesla BH d.o.o
100%
7
7
Ericsson Nikola Tesla d.d. – Branch office Kosovo (1)
100%
-
1
1,052
1,053
(1) As of 1 January 2022, the Parent company Ericsson Nikola Tesla d.d. has merged Ericsson Nikola Tesla Branch Office
Kosovo, and the financial statements and the results of the branch are included in the Parent company's financial
statements.
16 Inventories
2022
2021
HRK ‘000
HRK ‘000
Raw materials
22,061
Contract work in progress
34,084
89,048
56,145
89,048
Annual report
265
Ericsson Nikola Tesla Group
Notes to the Financial Statements of Ericsson Nikola Tesla d.d. (continued)
17 Trade receivables
2022
2021
HRK ‘000
HRK ‘000
Foreign trade receivables
42,761
80,395
Current portion of non-current foreign receivables
-
20,367
Total current foreign receivables
42,761
100,762
Domestic trade receivables
76,570
13,926
Impairment allowance on receivables
(645)
(6,204)
118,686
108,484
Movements in impairment allowance on loans and receivables were as follows:
2022
2021
HRK ‘000
HRK ‘000
7,560
9,914
As at 1 January
Impact of discounting non-current receivables
117
(269)
Receivables written off during the year as uncollectible
(1,347)
(1,304)
Impairment on receivables
(4,064)
(781)
As at 31 December (1)
2,266
7,560
(1) Including impairment provision for receivables from related parties of HRK 1,517 thousand (2021: HRK 1,326
thousand).
Annual report
266
Ericsson Nikola Tesla Group
Notes to the Financial Statements of Ericsson Nikola Tesla d.d. (continued)
18 Other receivables
2022
2021
HRK ‘000
HRK ‘000
Advances given
1,072
17,983
Deposits
5,800
13,317
Net VAT receivables
-
4,049
Loans given
7,534
-
Receivables for existing customer financing agreements (note 4b)
4,885
-
Other receivables
1,358
887
20,649
36,236
19 Financial assets at fair value
through profit or loss
2022
2021
HRK ‘000
HRK ‘000
Financial assets at fair value through profit or loss
- Equity securities
312
1,544
- Investment in open-ended investment funds
30,762
31,453
31,074
32,997
20 Cash and cash equivalents
2022
2021
HRK ‘000
HRK ‘000
458,279
333,819
Cash and demand deposits
Impairment loss (Note 31(d))
(1,094)
(1,518)
457,185
332,301
Annual report
267
Ericsson Nikola Tesla Group
Notes to the Financial Statements of Ericsson Nikola Tesla d.d. (continued)
21Equity
(a) Share capital
As at 31 December 2022, the share capital of the Company is represented by 1,331,650 (2021: 1,331,650) of authorized,
issued and fully paid ordinary shares, with a total registered value of HRK 133,165 thousand (2021: HRK 133,165
thousand).
The nominal value of one share is HRK 100 (2021: HRK 100). The holders of the ordinary shares are entitled to receive
dividends as declared at the Annual General Meeting and are entitled to one vote per share at the Annual General
Meeting.
The Company’s shareholders as at 31 December are:
Number of
% held
Number of
% held
shares
shares
2022
2021
Telefonaktiebolaget LM Ericsson
653,473
49.07
653,473
49.07
Ostali dioničari
668,166
50.18
671,226
50.41
Vlastite dionice
10,011
0.75
6,951
0.52
1,331,650
100.00
1,331,650
100.00
(b) Treasury shares
These shares are held initially as “treasury shares” and are regularly granted to key management and other employees
as a part of the share-based program established during 2004, as described in Note 24 (b). Shares transferred to
employees are recognized on a first-in-first-out basis.
Movements in treasury shares are as follows:
Number of
Number of
shares
shares
2022
2021
As at 1 January
6,951
406
Purchased during the year
6,585
8,115
Distributed during the year
(3,525)
(1,570)
As at 31 December
10,011
6,951
(c) Legal reserves
A legal reserve in the amount of 5% of total share capital was formed during previous periods by appropriation of 5% of
net profit per annum up to a cap of 5% of share capital. The legal reserve may be used to cover losses if the losses are
not covered by current net profit or if other reserves are not available. The Company recorded the required level of legal
reserves in 2000 and no further allocation to legal reserves is required. Legal reserves up to 5% of total share capital are
not distributable.
(d) Reserve for own shares
Reserve for own shares is separated by the decision of Annual General Meeting.
Annual report
268
Ericsson Nikola Tesla Group
Notes to the Financial Statements of Ericsson Nikola Tesla d.d. (continued)
21 Equity (continued)
(e) Dividends
Dividends payable are not accounted for until they have been ratified at the Annual General Meeting of shareholders.
On 27 June 2022, the Annual General Meeting approved a regular dividend in respect of 2021 of HRK 64.00 per share,
totaling HRK 84,649 thousand.
Cash dividends authorized and paid for previous years were as follows:
2022
2021
HRK ‘000
HRK ‘000
HRK 64.00 per share for 2021
84,649
-
HRK 82.00 per share for 2020
-
109,162
Prior year dividend payout
102
4
84,751
109,166
Annual report
269
Ericsson Nikola Tesla Group
Notes to the Financial Statements of Ericsson Nikola Tesla d.d. (continued)
22 Borrowings
2022
2021
HRK ‘000
HRK ‘000
Loans
14,088
28,176
Borrowings, Note 4 (b)
1,621
2,894
Total liabilities for borrowings
15,709
31,070
Short term portion
14,088
14,088
Long term portion
16,201
16,982
Changes in liabilities from financing activities
Borrowings
HRK ‘000
Year ended 31 December 2021
Opening net book amount
44,528
Cash transactions
Proceeds from loans
-
Repayment of loans and borrowings
(14,831)
Non-cash transactions
Overtake of liability towards bank
1,787
Accrued interest
743
Foreign exchange differences
(3)
Release of obligations (Note 4(b))
(1.154)
Closing net book amount
31,070
Year ended 31 December 2021
Opening net book amount
31,070
Cash transactions
Proceeds from loans
-
Repayment of loans and borrowings
(26,190)
Non-cash transactions
Overtake of liability towards bank
12,691
Foreign exchange differences
1
Release of obligations (Note 4(b))
(1.863)
Closing net book amount
15,709
Loan is taken due to the Energy Efficiency project for premises in Zagreb (Krapinska 45). Loan has fixed interest rate.
Borrowings movement reflect increase and repayment of the obligations toward banks arising from refinancing of
customer credit.
Recognition of liabilities is generated by forming obligation toward banks for existing customer financing agreements.
Annual report
270
Ericsson Nikola Tesla Group
Notes to the Financial Statements of Ericsson Nikola Tesla d.d. (continued)
23 Other non-current liabilities
2022
2021
HRK ‘000
HRK ‘000
Liabilities for issued guarantee, Note 4 (b)
-
296
Other non-current liabilities, Note 4 (b)
-
146
-
442
24 Employee benefits
a) Long-term service benefits
The Company does not operate any pension schemes or other retirement benefit schemes for the benefit of any of its
employees or management. In respect of all of the Company’s personnel, such social payments as required by the
authorities are paid. These contributions form the basis of social benefits payable out of the Croatian Pension Insurance
Institute to the Croatian employees upon their retirement. Additionally, in 2001 the Company signed an Annex to the
Union Agreement based on which employees are entitled to a benefit upon early retirement.
However, the Company pays a one-time benefit amounting to HRK 8,000 for each employee who retires. Additionally,
the Company pays jubilee awards in respect of each 5 years of service, of an employee, starting from the 10th year and
ending in the 40th year. The principal actuarial assumptions used to determine retirement and jubilee obligations as at
31 December 2022 were a 1.92% discount rate (2021: 1.92%) and a 7,41% (2021: a 6.26%) rate of average employment
turnover.
Movements in long-term service benefits were as follows:
Jubilee
Jubilee
awards Retirement
Total
awards Retirement
Total
2022
2021
HRK ‘000
HRK ‘000 HRK ‘000 HRK ‘000
HRK ‘000 HRK ‘000
As at 1 January
5,216
886
6,102
6,647
688
7,335
Obligation created during the year
212
-
212
-
222
222
Obligation fulfilled during the year
(462)
(48)
(510)
(635)
(24)
(659)
Obligation reversed during the year
-
(22)
(22)
(796)
-
(796)
As at 31 December
4,966
816
5,782
5,216
886
6,102
Annual report
271
Ericsson Nikola Tesla Group
Notes to the Financial Statements of Ericsson Nikola Tesla d.d. (continued)
24 Employee benefits (continued)
b) Share-based payments
In 2004, the Parent Company established its Loyalty program, a share-based scheme under key employees are entitled
to receive the Parent Company´s shares conditional on the employee completing certain years of service (the vesting
period) from the grant date.
The treasury shares are distributed to eligible employees upon ratification at the Annual General Meeting.
In 2022 the Parent Company continued its Loyalty program and granted additional shares to eligible employees under
vesting condition related to years of service with the Parent Company.
Movements in shares under the Award and Loyalty programs are as follows:
2022
2021
Number of shares Number of shares
As at 1 January
14,455
6,915
Granted
50
9,335
Exercised
(3,525)
(1,570)
Expired
(330)
(225)
As at 31 December
10,650
14,455
Vesting conditions for shares granted under Loyalty program are one to four years of service.
The fair value of service received in return for shares granted is measured by reference to the observable market price of
shares at the grant date.
During 2022, the Company had HRK 7,511 thousand expenses (2021: HRK 4,405 thousand) in respect of share-based
payments, which are included in personnel expenses as disclosed in Note 8.
Annual report
272
Ericsson Nikola Tesla Group
Notes to the Financial Statements of Ericsson Nikola Tesla d.d. (continued)
25 Trade and other payables
2022
2021
HRK ‘000
HRK ‘000
Trade payables
47,241
14,406
Liabilities to employees
137,158
111,901
VAT liabilities
13,217
-
Other current liabilities
24,207
22,369
221,823
148,676
26 Provisions
Movements in provisions were as follows:
Termination
Other
Warranty
reserve
benefits
reserve
Total
HRK ‘000
HRK ‘000
HRK ‘000
HRK ‘000
As at 1 January 2021
2,195
5,029
6,374
13,598
Additional provisions
635
7,238
-
7,873
Unused provisions reversed
(202)
(44)
(360)
(606)
Provisions used during the year
(792)
(6,513)
(253)
(7,558)
As at 31 December 2021
1,836
5,710
5,761
13,307
As at 1 January 2022
1,836
5,710
5,761
13,307
Additional provisions
157
6,410
3,513
10,080
Unused provisions reversed
(165)
-
-
(165)
Provisions used during the year
(162)
(7,229)
(60)
(7,451)
As at 31 December 2022
1,666
4,891
9,214
15,771
The warranty reserve is established to cover the expected warranty claims on products sold during the year. Reversal
of warranty reserves relates to expired warranties.
Followed by the prudence principle and based on the circumstances and other factors, including expectations of future
events, additional provisions were made.
Annual report
273
Ericsson Nikola Tesla Group
Notes to the Financial Statements of Ericsson Nikola Tesla d.d. (continued)
27 Accrued charges and deferred
revenue
2022
2021
HRK ‘000
HRK ‘000
Deferred revenue
5,968
5,928
Accrued charges for unused holidays
31,389
27,301
Accrued charges in respect of service contracts
74,864
39,196
Other accrued charges
17,662
18,940
91,365
129,883
Deferred revenue represents mainly government grants relating to costs which are deferred and recognized in income
statement in the same time when the relating costs are recognized.
Accrued charges in respect of service contracts mainly represent costs incurred for which no invoice has been received
from supplier or other external contractor at reporting date.
Annual report
274
Ericsson Nikola Tesla Group
Notes to the Financial Statements of Ericsson Nikola Tesla d.d. (continued)
28 Contract liabilities
The Company has recognized the following liabilities arising from contracts with customers:
31 December 2022
31 December 2021
HRK ‘000
HRK ‘000
Contract liabilities – advances from customers
17,090
52,528
Contract liabilities – deferred revenue
167,124
194,781
Total current contract liabilities
184,214
247,309
As at 31 December 2022 the Company recognized HRK 184,214 thousand of contract liabilities in respect of the
contracts related to modernization of mobile and fixed network, project-related services and support activities, e-Health
Information Systems and other (as at 31 December 2021: HRK 247,309 thousand).
The following table presents information on unsatisfied performance obligations resulting from long-term contracts with
customers.
31 December 2022
31 December 2021
HRK ‘000
HRK ‘000
Aggregate amount of the transaction price allocated to
long-term contracts that are fully unsatisfied
101,601
107,350
Aggregate amount of the transaction price allocated to
long-term contracts that are partially unsatisfied
55,442
363,166
157,043
470,516
The Company expects to recognize approximately 59% of the transaction price allocated to the remaining performance
obligations as revenue in financial year 2023, 40% as revenues in the financial year 2024 and 1% as revenues in the
financial year 2025.
All other contracts are for periods of one year or less or are billed based on time incurred.
Annual report
275
Ericsson Nikola Tesla Group
Notes to the Financial Statements of Ericsson Nikola Tesla d.d. (continued)
29 Leases
a)
Leases as lessee
The Company leases warehouse, office premises and parking lots. The leases typically run for a period of 5 years, with
an option to renew the lease after that date. For certain leases, the Company is restricted from entering into any
sub‑lease arrangements.
The warehouse, office premises and parking lots were entered many years ago as combined leases of land and buildings.
The Company leases vehicles under a number of lease contracts. The leases typically run for a period of 3 to 5 years.
Information about leases for which the Company is a lessee is presented below.
Right-of-use assets
Right‑of‑use assets related to leased properties that do not meet the definition of investment property are presented as
property, plant and equipment.
2022
2021
HRK ‘000
HRK ‘000
Balance as at 1 January
29,231
37,780
Depreciation charge for the year
(9,584)
(11,492)
Increase of right‑of‑use assets
11,894
5,785
Modifications
-
382
Derecognition of RoU assets
(613)
(3,224)
Balance as at 31 December
30,928
29,231
Amounts recognized in Statement of comprehensive income
2022
2021
HRK ‘000
HRK ‘000
Interest on lease liabilities
794
573
Income from sub-leasing
721
796
Expenses relating to short-term leases
252
325
Annual report
276
Ericsson Nikola Tesla Group
Notes to the Financial Statements of Ericsson Nikola Tesla d.d. (continued)
29 Leases (continued)
a) Leases as lessee (continued)
Extension options
Some property leases contain extension options exercisable by the Company up to one year before the end of the non-
cancellable contract period. Where practicable, the Company seeks to include extension options in new leases to provide
operational flexibility.
The Company assesses at lease commencement date whether it is reasonably certain to exercise the extension options.
The Company reassesses whether it is reasonably certain to exercise the options if there is a significant event or
significant changes in circumstances within its control.
The following table sets out a movement in lease liability:
2022
2021
HRK ‘000
HRK ‘000
Balance as at 1 January
29,447
38,246
Repaid lease liability
(9,409)
(11,697)
Additions to lease liability
11,894
5,785
Modifications
-
382
Derecognition of lease
(613)
(3,225)
Interest expense
794
573
Interest paid
(794)
(573)
FX rate
(195)
(44)
Balance as at 31 December
31,124
29,447
b) Leases as lessor
The Company leases out its property consisting of commercial properties. All leases are classified as operating leases
from a lessor perspective.
Operating lease
The Company leases out its owned commercial properties. The Company has classified these leases as operating leases,
because they do not transfer substantially all of the risks and rewards incidental to the ownership of the assets.
Rental income recognized by the Company during 2022 was HRK 33,038 thousand (2021: HRK 16,961 thousand).
The following table sets out a maturity analysis of lease payments to be received after the reporting date.
2022
2021
Operating leases under IFRS 16
HRK ‘000
HRK ‘000
Less than one year
12,496
9,163
Between one and three years
19,169
12,680
Between three and five years
9,549
7,607
More than five years
4,091
7,775
Total
45,305
37,225
Annual report
277
Ericsson Nikola Tesla Group
Notes to the Financial Statements of Ericsson Nikola Tesla d.d. (continued)
30 Balances and transactions with
related parties
For the purposes of these financial statements, parties are generally considered to be related if one party has the ability
to control the other party, is under common control, or can exercise significant influence over the other party in making
financial and operational decisions. In considering each possible related party relationship, attention is directed to the
substance of the relationship, not merely the legal form.
The Company is
a related party to the Ericsson Group via the 49.07% (2021: 49.07%) shareholding by
Telefonaktiebolaget LM Ericsson, which is also the ultimate parent of the Ericsson Group.
The Company has related-party relationships with Telefonaktiebolaget LM Ericsson, Ericsson Group subsidiaries and
associates, the Supervisory Board, the Management Board and other executive management.
(a) Key transactions with the related parties
Major transactions with the Ericsson Group companies may be summarized as follows:
Other Ericsson Group
ENT Group
consolidated
Telefonaktiebolaget
consolidated
companies
LM Ericsson
companies
Total
2022
2021
2022
2021
2022
2021
2022
2021
HRK ‘000 HRK ‘000 HRK ‘000 HRK ‘000 HRK 000 HRK ‘000 HRK ‘000 HRK ‘000
Sales of goods and services
Sales revenue
-
- 1,018,095 895,268
8,227
7,119 1,026,322 902,387
Other income
-
-
35,843 21,242
2,450
147 38,293 21,389
-
- 1,053,938 916,510
10,677
7,266 1,064,615 923,776
Purchases of goods and
services
Licenses
3,136
3,074
16,526
17,647
-
-
19,662
20,721
Cost of sales
-
-
229,752 256,109
39,125
20,838 268,877 276,947
3,136
3,074 246,278 273,756
39,125
20,838 288,539 297,668
The sales of goods and services transactions have been directly negotiated between the involved parties and agreed on
an individual basis. The Company pays: (i) license fees on sales of services and products, (ii) corporate trademark
licenses, (iii) support services, (iv) R&D tools and (v) IS/IT fee. The license fee is paid as a percentage of sales of services
and sales of products.
Annual report
278
Ericsson Nikola Tesla Group
Notes to the Financial Statements of Ericsson Nikola Tesla d.d. (continued)
30 Balances and transactions with
related parties (continued)
(b)
Key management compensation
The key management include the executive management listed under Company profile, comprising the Management
Board member and directors of main organizational units.
2022
2021
HRK ‘000
HRK ‘000
Salaries and other short-term employee benefits
26,584
26,455
26,584
26,455
The members of the executive management and the Supervisory Board held 3,669 ordinary shares at the year-end
(2021: 4,429 shares).
In addition, the Group paid remuneration totaling HRK 488 thousand (2021: HRK 423 thousand) to the Supervisory
Board and Audit Committee members during 2022.
(c)
Year-end balances arising from sales and purchases of goods and services
Year-end balances arising from key transactions with Ericsson Group companies may be summarized as follows:
Trade receivable
Trade payable
2022 2021
2022
2021
HRK ‘000
HRK ‘000
HRK ‘000
HRK ‘000
Telefonaktiebolaget LM Ericsson (LME), largest individual
shareholder
-
-
-
-
41,845
3,977
Other Ericsson Group companies
133,846
74,383
Subsidiaries:
Ericsson Nikola Tesla BH d.o.o
3,623
2,626
1,092
812
1,983
718
Ericsson Nikola Tesla Servisi d.o.o.
6,877
3,050
Ericsson Nikola Tesla d.d. – Branch office Kosovo, Note 15
73
72
-
-
Libratel d.o.o.
-
-
-
-
57
290
Ericsson Nikola Tesla BY
47
47
144,466
80,178
44,977
5,797
(d) Loans givenThe Company gave loan to subsidiary Ericsson Nikola tesla BH d.o.o. and at the reporting date has
receivable in the amount od HRK 7,534 thousand (2021: there were no loans given).
Annual report
279
Ericsson Nikola Tesla Group
Notes to the Financial Statements of Ericsson Nikola Tesla d.d. (continued)
31 Financial risk management
The Company’s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk,
and price risk), credit risk and liquidity risk. Exposure to currency, interest rate and credit risk arises in the normal course
of the Company’s business. Risk management is carried out by a treasury department and its principal role is to actively
manage investment of excess liquidity as well as financial assets and liabilities, and to manage and control financial risk
exposures. The Company also has a customer finance function with the main objective to find suitable third-party
financing solutions for customers and to minimize recourse to the Company. Risk management policies that relate to
financial instruments can be summarized as follows:
(a) Currency risk
Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates.
The Company is exposed to US dollars and to the euro, as a substantial proportion of receivables and foreign revenues
are denominated in these currencies. Risk management relies on attempts to match, as much as possible, revenues in
each currency with the same currency expenditure. The Company may enter into foreign currency forward contracts to
hedge economically its exposure to currency risk arising on operating cash flows.
As at 31 December 2021, if the euro and US dollar had weakened/strengthened by 1% (2021: 1%) against the Croatian
kuna, with all other variables held constant, the net result after tax for the reporting period would have been HRK 1,573
thousand higher/lower for the Company (2021: HRK 1,545 thousand), mainly as a result of foreign exchange
losses/gains on translation of cash, cash equivalents, deposits, trade payables, customer receivables and customer
financing denominated in euro.
Other currencies to which The Group is exposed are: SEK, BAM, PLN, GBP.
The Company continues to focus on securing natural hedges and active currency management and to minimize impacts
from currency moves. The Company’s exposure to foreign currencies is shown in the table below.
Annual report
280
Ericsson Nikola Tesla Group
Notes to the Financial Statements of Ericsson Nikola Tesla d.d. (continued)
31 Financial risk management
(continued)
(a) Currency risk (continued)
The tables below present the currency analysis and the resulting gap.
Other Total foreign
currency
currencies
2022
EUR
USD
HRK
Total
HRK ‘000
HRK ‘000 HRK ‘000
HRK ‘000
HRK ‘000
HRK ‘000
Loans and receivables
10,269
-
-
10,269
5,548
15,817
Trade and other receivables
184,071
3,572
139
187,782
90,223
278,005
Financial assets at fair value
through profit or loss
-
-
2
2
31,072
31,074
Cash and cash equivalents
62,707
10,198
8,007
80,912
382,073
462,985
257,047
13,770
8,148
278,965
508,916
787,881
Borrowings and lease liabilities
(32,662)
-
-
(32,662)
(14,172)
(46,834)
Trade and other payables
(44,856)
(1,484)
(17)
(46,358)
(239,616)
(285,974)
(77,518)
(1,484)
(17)
(79,020)
(253,788)
(332,808)
Currency gap
179,529
12,286
8,131
199,945
255,128
455,073
Other Total foreign
currency
currencies
2021
EUR
USD
HRK
Total
HRK ‘000
HRK ‘000 HRK ‘000
HRK ‘000
HRK ‘000
HRK ‘000
Loans and receivables
10,312
1,828
-
12,140
9,835
21,975
Trade and other receivables
162,655
5,189
1,709
169,553
37,980
207,533
Financial assets at fair value
through profit or loss
-
-
1,259
1,259
31,740
32,999
Cash and cash equivalents
78,650
14,339
9,438
102,427
243,191
345,618
251,617
21,365
12,406
285,379
322,746
608,125
Borrowings and lease liabilities
(30,361)
5
-
(30,356)
(30,161)
(60,517)
Trade and other payables
(52,497)
(1,754)
185
(54,066)
(157,479)
(211,545)
(44,868)
(1,749)
185
(84,422)
(187,640)
(272,062)
Currency gap
206,749
19,607
12,591
200,957
135,106
336,063
Annual report
281
Ericsson Nikola Tesla Group
Notes to the Financial Statements of Ericsson Nikola Tesla d.d. (continued)
31 Financial risk management
(continued)
(b) Interest rate risk
Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates.
As the Company mainly has its customer financing at a fixed interest rate and only a small portion of customer financing
is affected by possible changes in market interest rates, the risk of fluctuating market interest rates is considered low.
The Company also has deposits in financial institutions at a variable interest rate.
As at 31 December 2021:
–
if the effective EUR interest rate on EUR deposits had increased/decreased by 1% (2021: 1%) on an annual level,
the net result due to changes in EUR deposits after tax for the reporting period would have been HRK 0 thousand
higher/lower (2021: HRK 0 thousand).
if the effective HRK interest rate on HRK deposits had increased/decreased by 1% (2021: 1%) on an annual level,
–
the net result due to changes in HRK deposits after tax for the reporting period would have been HRK 0 thousand
higher/lower (2021: HRK 0 thousand).
–
if the effective USD interest rate on USD deposits had increased/decreased by 1% (2021: 1%) on an annual level,
the net result due to changes in USD deposits after tax for the reporting period would have been HRK 0 thousand
higher/lower (2021: HRK 0 thousand);
The following table presents the annual average interest rates exposure of financial assets and liabilities:
Average interest
Average interest
rates
rates
2022
2021
%
%
Loans and receivables
0.09
0.14
Cash and cash equivalents
0.01
Annual report
282
Ericsson Nikola Tesla Group
Notes to the Financial Statements of Ericsson Nikola Tesla d.d. (continued)
31 Financial risk management
(continued)
(c) Price risk
The Company has insignificant exposure to debt securities price risk due to low investments and all classified on the
balance sheet at fair value through profit or loss (investments funds).
(d) Credit risk
Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party
to incur a financial loss. Significant risk is associated with a high level of customer finance receivables.
The internal directives to manage the credit risks have been tightened during 2015 with the implementation of updated
credit management framework and implementation of credit evaluation tools to manage credit risks.
Credit Management function within the Treasury has been established to further assist the Company in managing its
credit risk exposure. New customers are only accepted on satisfactory completion of a detailed credit check of the
customer and a review of the related country risk. Outstanding credit arrangements are monitored on a quarterly or
annual basis depending on risk category. Impairment losses are calculated by discounting receivables. Additionally,
there is credit concentration risk as the Company has a significant portion of receivables outstanding from a small
number of customers. As at 31 December 2022, the five largest customers represent 62% of total net trade receivables
(2021: 67%).
The Company considers that its maximum exposure to credit risk is reflected in the amount of trade receivables (Notes
14 and 17) and other receivables (Note 18), not including impairment for doubtful receivables. Ageing analysis of these
receivables is within the maturity analysis table shown further in this note.
Letters of credit are used as a method for securing payments from customers operating in certain markets, in particular
in markets with unstable political and/or economic environments. By having banks confirming the letters of credit, the
political and commercial credit risk exposures are mitigated.
Prior to the approval of new facilities reported as customer finance, an internal credit risk assessment is conducted in
order to assess the credit rating for political and commercial risk of each transaction. A reassessment of the credit rating
for each customer finance facility is made on a regular basis.
The Company defines customer financing as any credit period longer than 179 days. The Company is working closely
with Croatian Bank for Reconstruction and Development (HBOR) and partnership banks to secure risk mitigation.
Provisions related to customer finance risk exposures are only made when they are reliably measurable and where, after
the financing arrangement has become effective, certain events occur which are expected to have a significant adverse
impact on the borrower’s ability and/or willingness to service the outstanding debt. These events can be political
normally outside the control of the borrower or commercial, e.g. the borrower’s deteriorating creditworthiness.
Security arrangements for customer finance facilities normally include pledges of equipment and pledges of certain of
the borrower’s assets. If available, third-party risk coverage may also be arranged. “Third-party risk coverage” means
that a financial payment guarantee covering the credit risk has been issued by a bank, an export credit agency or other
financial institution. It may also be a credit risk transfer under the so-called “sub-participation arrangement” with a bank,
whereby the credit risk and the funding is taken care of by the bank for the part covered by the bank. A credit risk cover
from a third party may also be issued by an insurance company.
Impairment of receivables
Cash equivalents amounted to HRK 462,985 thousand as at 31 December 2022 (31 December 2021: HRK 334,101
thousand). Provisions for expected credit losses on cash and deposits amounted to HRK 1,094 thousand as at 31
December 2022 (31 December 2021: HRK 1,518 thousand). The Company’s write-offs have historically been low.
Trade receivables, receivables from related party and contract assets together amounted to HRK 263,152 thousand as
at 31 December 2022 (HRK 188,662 as at 31 December 2021). Provisions for expected credit losses on trade receivables
and receivables from related party amounted to HRK 2,184 thousand as at 31 December 2022 (HRK 7,547 as at 31
December 2021). The Company’s write-offs have historically been low.
Annual report
283
Ericsson Nikola Tesla Group
Notes to the Financial Statements of Ericsson Nikola Tesla d.d. (continued)
31 Financial risk management
(continued)
(d) Credit risk (continued)
The following tables provide an ageing detail of current and overdue amounts in respect of all customer loans and
receivables as at 31 December 2022 and 2021.
Table 1
Payment due date for total customer loans and receivables *
3 months
Due
Up to 3
to
1 to 3
Over 3
balance
months
1 year
years
years
Total
HRK ‘000
HRK ‘000
HRK ‘000
HRK ‘000
HRK ‘000
HRK ‘000
2022
Foreign receivables
6,763
32,056
3,782
3,719
-
46,320
Domestic receivables
614
51,882
24,234
-
-
76,730
Receivables from related parties
4,361
141,624
-
-
-
145,985
11,738
225,562
28,016
3,719
-
269,035
* excluding impairment allowance
2021
Foreign receivables
2,170
64,666
32,589
6,138
109
105,672
Domestic receivables
10,051
4,035
13
-
-
14,099
Receivables from related parties
10,066
71,438
-
-
-
81,504
22,287
140,139
32,602
6,138
109
201,275
* excluding impairment allowance
Table 2
Ageing of total due customer loans and receivables
3 months
Over 3
Up to 3
to
1 to 3
months
1 year
years
years
Total
HRK ‘000
HRK ‘000
HRK ‘000
HRK ‘000
HRK ‘000
2022
4,027
2,736
-
-
6,763
Foreign receivables
221
125
159
109
614
Domestic receivables
3,369
604
215
173
4,361
Receivables from related parties
7,617
3,465
374
282
11,738
2021
2,170
-
-
-
2,170
Foreign receivables
Domestic receivables
8,329
1,301
365
56
10,051
Receivables from related parties
7,204
2,395
371
96
10,066
17,703
3,696
736
152
22,287
Annual report
284
Ericsson Nikola Tesla Group
Notes to the Financial Statements of Ericsson Nikola Tesla d.d. (continued)
31 Financial risk management
(continued)
(e) Liquidity risk
Liquidity risk, also referred to as funding risk, is the risk that an enterprise will encounter difficulty in raising funds to
meet commitments associated with financial instruments. As the Company has no commitments in financial instruments,
the risk lies only in its daily operations. The Company has a strong focus on its cash flow with daily updates on actual
development and monthly updated forecasts. The Company’s maturity profile demonstrates the strong liquidity position
of the Company and therefore the risk is considered low. The table below presents the maturity analysis and resulting
gap.
The Company has a revolving credit facility with our core banks should an extraordinary liquidity need arise. As at 31
December 2022, the facility remained untapped.
Up to 1
1–3
3–12
1–5
Over 5
2022
month
months
months
years
years
Total
HRK ‘000
HRK ‘000
HRK ‘000
HRK ‘000
HRK ‘000
HRK ‘000
Loans and receivables
-
-
-
14,737
1,080
15,817
Trade and other receivables
128,273
113,528
36,204
-
-
278,005
Current financial assets
31,074
-
-
-
-
31,074
Cash and cash equivalents
458,985
-
4,000
-
-
462,985
618,332
113,528
40,204
14,737
1,080
787,881
Borrowings
(84)
-
(14,088)
(1,621)
-
(15,793)
Lease liabilities
-
-
(6,855)
(24,186)
-
(31,041)
Trade and other payables
(167,944)
(117,725)
(305)
-
-
(285,974)
(168,028)
(117,725)
(21,248)
(25,807)
-
(332,808)
Maturity gap
450,304
(4,197)
18,956
(11,070)
1,080
455,073
Up to 1
1–3
3–12
1–5
Over 5
2021
month
months
months
years
years
Total
HRK ‘000
HRK ‘000
HRK ‘000
HRK ‘000
HRK ‘000
HRK ‘000
Loans and receivables
3
18
54
20,057
1,843
21,975
Trade and other receivables
123,864
55,186
27,241
1,242
-
207,533
Current financial assets
32,999
-
-
-
-
32,999
Cash and cash equivalents
332,301
-
13,317
-
-
345,618
489,167
55,204
40,612
21,299
1,843
608,125
Borrowings
-
-
(28,176)
(3,195)
-
(31,371)
Lease liabilities
-
-
(8,134)
(21,012)
-
(29,146)
Trade and other payables
(121,677)
(86,005)
(3,421)
(442)
-
(211,545)
(121,677)
(86,005)
(39,731)
(24,649)
-
(272,062)
Maturity gap
367,490
(30,801)
881
(3,350)
1,843
336,063
Annual report
285
Ericsson Nikola Tesla Group
Notes to the Financial Statements of Ericsson Nikola Tesla d.d. (continued)
31 Financial risk management
(continued)
(f) Fair value estimation
Financial assets at fair value through profit and loss are carried at fair value at the balance sheet date. The fair
value is estimated by reference to their quoted active market price at the balance sheet date which represents
Level 1 input (Note 19).
A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker,
industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring
market transactions on an arm’s length basis. The quoted market price used for financial assets held by the
Company is the current bid price. There are no financial assets derived from level 2 inputs which represent different
valuation techniques based on observable market data or from level 3 inputs which represent different valuation
techniques based on no observable market data.
The Company’s principal financial instruments not carried at fair value are cash and cash equivalents, trade
receivables, other receivables, non-current loans and receivables, trade and other payables and borrowings. The
fair value of loans and receivables and the fair value of borrowings are calculated based on the Management’s best
estimate of discounted expected future principal and interest cash flows, using the market-related rate for a similar
instrument at the balance sheet date as a discount rate. Fair values and carrying amounts are not significantly
different as the loans and receivables were granted at market rates, which were not substantially different from
market rates at the end of reporting year.
Current financial assets are stated at fair value that is based on quoted prices at the balance sheet date without
any deduction for transaction costs.
The carrying amount of cash and cash equivalents and of bank deposits reflects fair value due to the short-term
maturity of these financial instruments. Similarly, the amortized cost carrying amounts of trade receivables and
payables with remaining life of less than one year and which are all subject to normal trade credit terms reflect fair
values. In 2022 1.33% (2021: 0.75%) interest rates were used for determining fair values, which are based on
available market rates for similar financial instruments.
(g) Capital management
The Company’s objectives when managing capital are:
to safeguard the entity’s ability to continue as a going concern, so that it can continue to provide returns
–
for shareholders and benefits for other stakeholders;
to provide adequate requirements for capital resources, as far as possible, by the retention of profit;
–
to maintain a prudent balance sheet with adequate component of cash and short-term assets, as well
–
as equity and other investments; and
to secure adequate back-up funding facilities should a need arise.
–
The Company is generating sufficient cash from operations to fund liabilities as they become due, finance
customers when required and budgeted investments, and pay dividends.
The Company monitors capital using the statutory minimum capital requirement. Shareholders’ equity is disclosed
in Note 21 to the financial statements.
Annual report
286
Ericsson Nikola Tesla Group
Notes to the Financial Statements of Ericsson Nikola Tesla d.d. (continued)
32 Subsequent events
The Government of the Republic of Croatia adopted the Decision on the announcement of the introduction of the
euro as the official currency in the Republic of Croatia (published in "Official Gazette" No. 85/22). With the
aforementioned decision, the euro becomes the official monetary unit and legal currency in the Republic of Croatia
on 1 January 2023. The fixed conversion rate is set at HRK 7.53450 for one euro. The introduction of the euro as
the official currency in the Republic of Croatia represents a change in the functional currency that will be calculated
prospectively and does not represent an adjusting subsequent event.
The Report of Ericsson Nikola Tesla d.d. Supervisory Board on the
supervision performed on the Company’s operations in 2022
April 21, 2023
Pursuant to the provisions of the Croatian Companies Act and Ericsson Nikola Tesla d.d. Articles
of Association, the Supervisory Board of Ericsson Nikola Tesla d.d. monitored the managing of the
Company's business operations, taking respective decisions and conclusions at four (4) regular
and two (2) extraordinary Supervisory Board meetings, held in 2022.
In 2022, the members of the Supervisory Board were:
-
Franck Pierre Roland Bouétard (Chairperson)
-
Olgica Spevec (Deputy Chair)
-
Ana Vrsaljko Metelko (Member)
-
Petra Vranjes (Member, on December 30, 2022, she resigned with effect as of January 01,
2023)
-
Vladimir Filipović (Member and employees' representative until November 29, 2022)
-
Petar Šimundža (Member and employees' representative since November 29, 2022)
There was full attendance of the Supervisory Board members at the meetings, except for the
meeting held on February 3, 2022, when Petra Vranjes was absent.
The Company’s Management Board regularly informed the Supervisory Board on all important
business activities, assets and liabilities positions, revenues, and the course of business
performance.
At regular meetings, the Supervisory Board discussed business environment, risk management,
activities with the customers, focus areas, strategic projects, realization of targets and financial
performance. Further topics of discussion encompassed investments, compliance, significant
business transactions that include the Company and its related parties, as well as issues regarding
human resources and shareholders. The Supervisory Board has been regularly informed about the
development of business and responsibilities of the Research & Development Center, Customer
Services and Solutions Center, Center for ICT solutions for Digital Society, IT & Engineering
Services Unit, and the daughter company Ericsson Nikola Tesla Servisi d.o.o..
At extraordinary Supervisory Board meetings, the members discussed targets for 2022, impact
of crisis in Belarus on the Group’s business activities and results in 2022, approval of annual
financial statements for 2021, dividend proposal for 2021, and the Remuneration Report for
Supervisory Board members and Management Board in 2022.
Based on a continuous focus on retaining, developing and attracting people to secure business
continuity, the Company’s Supervisory Board supported the Management Board proposal to
allocate MHRK 10 from retained earnings from 2020 for the program of purchase of treasury
shares that will be used to pay a part of the bonus as well as an award for the Company’s
employees. Furthermore, the Management Board was given consent to allocate up to 5,000
treasury shares to the Company’s employees. The Company’s Annual General Meeting approved
the above proposals.
In March 2022, a strategic workshop between the Management Board and the Supervisory Board
was held, at which the strategic directions for the next five-year period were analyzed in detail
and concrete guidelines for the further development of the company were proposed. During the
year, the Supervisory Board has been continuously informed about the progress of each strategic
direction.
The Supervisory Board strongly supported the activities on strengthening ethics and compliance
business practice in order to secure that the Company meets the highest standards, in line with
the Code of Business Ethics of Ericsson Nikola Tesla Group. Ericsson Nikola Tesla’s Compliance
and Investigation Officer regularly informed the members of the Supervisory Board about the
reported compliance concerns, vetted third parties with indicated risks, evaluations of conflicts of
interest, compliance trainings for employees and improvements done after risk assessments.
The Supervisory Board also focused on the efficiency of the risk management system and internal
control. Based on the recommendation of the Audit Committee, which was based on the
independent internal and external audits of the management system, the Supervisory Board
concluded that the Ericsson Nikola Tesla Group has an efficient and strong integrated system of
managing business risks - Enterprise Risk Management, with concrete measures for
improvement.
The Supervisory Board conducted a self-assessment of the effectiveness, competences and
composition of the Supervisory Board and its Audit Committee, as well as the performance of
individual members. Furthermore, the Supervisory Board assessed the efficiency of cooperation
with the Management Board and the adequacy of the support and information it receives from
the Management Board. The evaluation was performed by the Supervisory Board itself, without
the engagement of external advisors. The tools for assessment included detailed questionnaires
and discussions.
The overall conclusion is that Ericsson Nikola Tesla’s Supervisory Board and its Audit Committee
performed well, had sufficient knowledge and experience, and were efficient in performing their
tasks. Especially strong is open communication with the Management Board, continuous support
to the Management Board in overcoming various challenges, dedicated and responsible work of
each Supervisory Board member, unanimity in decision making process, quality strategic
discussion, dedication to risk and compliance management, continuous monitoring of financial
results and the diversity of the Supervisory Board members in term of their qualifications and
gender representation.
In the forthcoming period, the Supervisory Board will continue to monitor strategic directions and
provide support to the Management Board and Executive Management in overcoming business
challenges, will maintain focus on profitability and other key financial indicators as well as
business risks. Furthermore, it will continue to strengthen the communication of Supervisory
Board members with the Company's shareholders to receive feedback about their expectations.
The Management Board assessed its own effectiveness in 2022 and presented its conclusions and
future plans at the Supervisory Board meeting. The Supervisory Board members agreed with the
self-assessment of the Management Board and thanked the Management Board for successfully
managing Ericsson Nikola Tesla Group in challenging 2022.
In 2020, the Supervisory Board set a target percentage regarding the representation of women;
namely 40% of women in the Supervisory Board and 30% in the Executive Management, among
managers and at the level of the entire company in the next five years. At the end of 2022, the
representation of women in the Supervisory Board was 60%. At Group’s level, the representation
of women in Executive Management was 23.5%, among line managers, program & project
managers 26%, and among the total number of employees 25%.
Analyzing the reports of the Management Board and monitoring the development of key financial
indicators, the Supervisory Board assessed that Ericsson Nikola Tesla Group had a successful
business performance in 2022, despite a challenging geopolitical and economic environment. An
increase in sales revenue was achieved owing to sales growth in services to Ericsson and sales in
the Digital Society segment in the domestic market. During 2022, the Group was focused on the
realization of many projects related to modernization and expansion of telecommunication
networks and digital transformation of the public and private sector, quality delivery and new
responsibilities from Ericsson corporation, as well as finding new opportunities in order to partially
offset the impacts of sanctions imposed on Belarus on business results. With the aim of
continuation of stable business performance, the Group remains focused on its strategic
directions, risk management, cost efficiency, as well as further strengthening of the company’s
culture based on integrity, ethics and compliance.
Work of the Audit Committee
The Audit Committee, a sub-committee of the Supervisory Board of Ericsson Nikola Tesla d.d.,
held five (5) meetings in 2022, during which it discussed the financial performance during the year
and annual financial statements, audit plan for 2021, internal and external audit findings, high-
level risks, quality control and risk management system, issues regarding compliance and safety
and performed other tasks defined by Audit Act and the Audit Committee Charter.
The Audit Committee met regularly with external auditors to review the audit plan and findings,
audit fee as well as the Report on the audit of the financial statements. It evaluated the
performance of the external auditors and enquired into their qualifications, independence and
objectivity. After negotiations with external auditors, the Committee approved audit fee for 2022.
It also pre-approved all non-audit services provided by the external auditors.
The Committee monitored the activities and approved Operational Excellence, Development &
Quality team and Independent Internal Audit plan and objectives for 2022. The Committee
reviewed Ericsson Nikola Tesla integrated system of managing business risks – ERM, based on
the „Three Lines of Defense“ model, in which there is the Independent Internal Audit function as
the „3rd Line of Defense“. Risk management, internal controls and compliance requirements have
been checked during 2022 by independent internal audits and assessments, as well as by external
audits of Ericsson Nikola Tesla Group Management System. Based on the outcome of the
mentioned audits and assessments, the Committee concluded that Ericsson Nikola Tesla Group
has efficient risk management system at all organizational and functional levels.
With respect to compliance, the Committee decided about reported compliance concerns. It
evaluated and monitored Ericsson Nikola Tesla Group Ethics and compliance program activities
with the special focus on tracking improvements after anti-bribery and corruption risk
assessments conducted internally and externally. The Audit Committee opinion is that Ericsson
Nikola Tesla Group has well established and efficient compliance procedures.
Based on the recommendation of the Audit Committee, the Supervisory Board proposed to the
General Meeting of Shareholders the appointment of KPMG Croatia as the auditor of Ericsson
Nikola Tesla d.d. for 2023.
During 2022, the members of the Audit Committee were: Olgica Spevec (Chairperson), Vesna
Vašiček (Member) and Petra Vranjes (Member). There was full attendance of Audit Committee
members at the meetings.
Based on the review of financial and other relevant business documents, the Management
Board’s report, and the Company’s auditors’ report, the Supervisory Board concluded the
following:
To the best of our knowledge, Ericsson Nikola Tesla d.d. in all material aspects operates
-
in compliance with the laws and Company’s enactments and in accordance with the
decisions made by the Annual General Meeting
-
The annual financial reports have been prepared in accordance with the business records
of Ericsson Nikola Tesla d.d. and its subsidiaries, and in all material aspects reflect the
correct financial and business situation of Ericsson Nikola Tesla d.d. and its subsidiaries
The Management Board’s proposal relating to net profit allocation is supported and
-
approved
-
There are no objections regarding the Management Board’s report and consequently the
report is approved
There are no objections regarding the Auditors’ report and consequently the report is
-
approved
-
Pursuant to the above stated, the submitted annual financial statements are approved.
Pursuant to the Croatian Companies Act, Article 300 d, the following documents are enclosed to
this Report:
1. Management Board’s Decision on Approving consolidated and non-consolidated annual
financial statements;
2. Decision by the Supervisory Board on Approving consolidated and non-consolidated
annual financial statements;
3. Management Board and Supervisory Board Decision proposal on allocating retained
earnings from year 2021 and the Company profit achieved in the financial year 2022.
For the Supervisory Board
_________________________________
Franck Pierre Roland Bouétard, Chairperson
Ericsson Nikola Tesla d.d. Zagreb
Krapinska 45
OIB: 84214771175
Zagreb, 21. travnja 2023.
Zagreb, April 21, 2023
Predmet: Odluka Nadzornog odbora Društva o utvrđenju
Subject: Supervisory Board Decision on Approving Annual
godišnjih financijskih izvješća
Financial Reports
Temeljem članka 300.d Zakona o trgovačkim društvima, Pursuant to the Company Act, Article 300.d the Supervisory
Nadzorni odbor dioničkog društva Ericsson Nikola Tesla d.d. Board of the Joint Stock Company Ericsson Nikola Tesla
Zagreb donosi slijedeće:
d.d. Zagreb, hereby confirms that:
-
Utvrđuju se godišnja financijska izvješća Društva za
-
The Annual Financial Statements of the Company
2022.g.
for 2022 have been approved.
-
Utvrđuju se godišnja konsolidirana financijska
-
The Annual Consolidated Financial Statements of
izvješća Društva i njegovih podružnica („Grupa“) za
the Company and its subsidiaries (the “Group”) for
2022. godinu.
2022 have been approved.
Ericsson Nikola Tesla d.d. Zagreb
Ericsson Nikola Tesla d.d. Zagreb
Za Nadzorni odbor
For Supervisory Board
Franck Pierre Roland Bouétard
Franck Pierre Roland Bouétard
Predsjednik
Chairperson
