The year 2018 was a great year to Bittium. The net sales in 2018 grew by 21.7 percent from previous year and was EUR 62.8 million. The share of the product-based net sales grew significantly and was EUR 30.8 million which was EUR 14.5 million more than in the corresponding period last year. The product-based net sales resulted mainly from the product deliveries of tactical communication systems, the deliveries of biosignal measuring and monitoring devices, deliveries of Bittium Tough Mobile™ smartphones and Mexsat phones, and their related security software deliveries.
The net sales of service business decreased from previous year and was EUR 32.1 million being EUR 2.8 million less than in the last year. The decrease in the services business net sales was mainly caused by the variation of the timing of R&D projects´ starts and ends which is typical for the nature of the business, as well as the company´s own significant large R&D projects that tie experts into internal product development.
Resulting from the growth of the net sales the company´s operating result was EUR 2.8 million. The growth of the operating profit was affected especially by the growth of the product based net sales.
During 2018, the cooperation with Finnish Defence Forces strengthened further. In the spring they ordered products related to the Software Defined Radio based Bittium Tactical Wireless IP Network™ (TAC WIN) system, which is meant for tactical communications. The value of the order was EUR 14.3 million (excl. VAT). The order is based on the framework agreement signed earlier by Bittium and the Finnish Defence Forces. In the fall, we signed a framework agreement with the Finnish Defense Forces on the purchase of Bittium Tough Comnode™ terminals and related accessories. The maximum value of the purchase for the framework agreement is EUR 8.3 million (excl. VAT). At the end of the year we signed a significant agreement with the Finnish Defence Forces on the purchase of the new Bittium Tough SDR™ handheld and vehicle radios, and their related accessories. The value of the Purchase Agreement is approximately EUR 10.5 million (excl. VAT) at the maximum. The purchase agreement includes terms for optional additional purchase, according to which, the Finnish Defence Forces have an option to purchase additional tactical radios and their related accessories, training and system management based on the prices agreed in the Purchase Agreement. If these optional additional purchase amounts would materialize in full, the total value of the purchase would be approximately EUR 207 million (excl. VAT) at the maximum.
The year 2018 was significant year for Bittium´s tactical communication product portfolio also from international point of view. We received the first big international tactical communication deal, as our Austrian cooperation partner Kapsch Business AG won the competitive bidding of Austrian Defence Administration on the new tactical communication system for Austrian Armed Forces. The core for the new communication system will be Software Defined Radio based Bittium Tactical Wireless IP Network™ (TAC WIN) system and their related Bittium Tough Comnode™ and Bittium Tough VoIP™ terminal products. When materialized in full, Bittium´s share of the total offering is approximately EUR 30 million.
Bittium has made several international tactical communication pilot deliveries. In 2018, most significant pilot delivery was to Spain, where we delivered new tactical Bittium Tough SDR Vehicular™ radios for the Spanish Army´s vehicle pilot program.
In the beginning of the year we made important international breakthrough with our ECG measuring devices as we signed a three-year supply agreement with a major US remote monitoring provider under which Bittium will supply the Bittium Faros™ 360 and customized Bittium Faros™ 360 cardiac ECG signal measuring and monitoring devices. When materialized in full, the total value of the agreement is USD 21 million.
In line with our strategy, we continued investments into our product business. The R&D investments in own products and product platforms were high, 34.4 percent of net sales. The investments focused mainly on extending the tactical communication product offering targeted for defense industry as well as on different terminal products and their related software development targeted for Mobile Security and Public Safety markets. We also continued further developing our products for measuring and monitoring of biosignals. We will continue investing significantly in our product development also in 2019 in order to finalize the ongoing R&D projects.
Significant part of Bittium´s strategy includes strengthening company´s position in the international markets. In regards to this, the year 2018 was remarkable year for us. Bittium is in a good position to continue growing also in the future.
As a part of the product development we have respect for sustainability in our products. Sustainability is proven in the business operations, as well as in our products and services. It is proven in the way we create value for the environment surrounding us, and for all stakeholders. Last year, for the first time, we calculated our carbon footprint and we will refine our calculations in the future.
I want to thank our personnel and partners for all the significant efforts made to reach our targets during last year. I also want to thank our customers for their loyalty and trust, as well as our shareholders for the support to reach our long term targets.
Hannu Huttunen, CEO