CEO’s review

In 2021, the direct and indirect impacts of the global COVID-19 pandemic were still present. The constantly changing situation and related restrictions posed challenges to business throughout the world. In spite of the challenges, Teleste’s order backlog grew substantially, and profitability improved compared to the previous year. The growth of the order backlog, investments in product development and confidence in positive market development create a solid foundation for success.

One of the most significant challenges to the company’s operations in 2021 was the component crisis, caused by uncertain availability, price increases and longer delivery times of components, which all resulted in delivery difficulties. To manage the situation, the company took measures to ensure the availability of components and to increase buffer stocks. Close cooperation with customers and suppliers in accordance with Teleste’s operating model proved to be crucial in overcoming these challenges. Largely due to the component crisis, the company’s sales remained at the previous year’s level, but profitability improved.

In the European market, we have long been the leading player in technology solutions for broadband cable networks. During the year, we continued our efforts to expand into the North American markets. For example, we introduced new smart next-generation amplifiers specifically designed for that market. The company’s network technology expertise is in clear demand in North America, and there are also opportunities for growth in video security and information systems.
In spite of the challenges faced by the industry as
a whole, we continued our R&D efforts in smart digital systems, which strengthens our position in the market. To improve our delivery capacity, we also started an expansion investment at our production facilities in Littoinen. This expansion, which is expected to be completed late 2022, will support the growth of our production capacity and will also enable insourcing of selected manufacturing tasks.

The COVID-19 pandemic has led to significant changes in the volume of network traffic and the nature of internet use. The growth of remote work, videoconferencing and online gaming, for example, has brought a shift towards two-way traffic, creating pressure to increase network capacity. However, during the pandemic and the component crisis, network operators have focused mainly on securing existing operations instead of making major investments.
The situation began to change in 2021, as network operators started to make investments in areas such as distributed access architecture and prepared for 1.8 GHz network development enabled by the DOCSIS® 4.0 broadband standard. This was reflected in our business particularly in the form of increased orders for next-generation products compared to the previous year. Our service business, which focuses on network design, installation, commissioning and maintenance, continued to be relatively stable in Finland and Switzerland, whereas in the UK the net sales of the service business declined due to changes in the customer environment, among other reasons.

Although passenger volumes in public transport have temporarily declined due to the pandemic, train manufacturers and public transport operators continued to invest in the development of passenger information systems. Significant new agreements were signed for train solutions to be delivered to France, Italy and the United Kingdom, for example. Station and central systems were delivered especially to public transport operators in Finland, Sweden, Denmark and Germany. The global megatrends such as urbanisation and ecological thinking contribute to the growth and development of public transport, creating demand for Teleste’s video security and information systems.
The public authorities also continued to invest in technical solutions that improve people’s safety,
and our order backlog for video security systems grew. During the year, we received significant follow-up orders for the delivery of video security systems to Scandinavia, France and the Middle
East, for example.

The second consecutive year of exceptional circumstances was full of challenges in many respects, but we nevertheless managed to improve the profitability of our business. By international comparison, we are a medium-sized company that is agile enough to take quick actions when the situation requires it, but also large enough to cope with major fluctuations in the market. The credit for this agility belongs especially to our highly motivated employees, who have shown strong commitment to our shared goals under changing circumstances.
One key factor that strengthens our operating capabilities is our sustainability agenda, which is put into action through our products as well as our operating practices. In addition to producing the best possible solutions for our customers’ business operations, we also invest heavily in ecologically and socially sustainable operations and products. Our high-quality technology also supports positive development in our society as a whole, creating better conditions for smart, safe, smooth and also sustainable everyday life.
As our sustainable operating practices are essential for establishing and maintaining long-term customer relationships, they also contribute to our profitability. During the year, we continued to invest in ESG (Environmental, Social and Corporate Governance) themes through organisational development and product development as well as energy-efficient and environmentally friendly products.

We continued to build our foundation for future success during 2021. Our strong order backlog puts us in a good position as we enter 2022. We have strong, trust-based cooperation with our customers and
we believe that our customer-focused approach will continue to be one of the cornerstones of our operations going forward. The near-term outlook is still characterised by exceptional circumstances and component availability issues, which continues to create uncertainty in our operating environment in 2022. We hope a more normal operating environment to be gradually restored over time.

We want to take this opportunity to thank all Teleste employees for their excellent work and our customers, partners and shareholders for their trust in Teleste. We also wish to thank Teleste’s Board of Directors for its support.

Jukka Rinnevaara, CEO until the end of 2021
Esa Harju, CEO from the beginning of 2022

Source: Teleste’s Annual Report 2021