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Supervisory Board endorsed the annual reports of Sava d.d. and the Sava Group

At the 32nd regular Supervisory Board meeting held on Thursday, 19 April 2012, the Supervisory Board of the joint stock company Sava dealt with and endorsed the annual reports of the Sava Group and Sava d.d.  for 2011. Due to the significant impairments of financial investments totalling €158.1 million, Sava d.d. ended the fiscal year with a loss. The impairments of financial investments of Sava d.d. affected the operating result of the entire Sava Group in spite of the effective business of Sava's real sector, Rubber Manufacturing, in particular.   In the first quarter of 2012 Sava operated with a profit, and the operating result of the Sava Group significantly surpassed the achievements of the past year as well as plan.

The Supervisory Board dealt with and endorsed the annual report of Sava d.d. and the consolidated annual report of the Sava Group for 2011. It dealt with and endorsed a written report by the Supervisory Board about the annual reports of the Sava Group and Sava d.d., which incorporate the business estimate and a review of the Management Board's performance in 2011 too. 

Owing to a further deterioration and the increased uncertainty in the economic environment, the year of 2011 was an extremely demanding one, both for Sava and its shareholders, and for the entire industrial sector in general.  Immediately after taking up their duty at the end of last March, the new Management Board, with a new vision of Sava's development, began to prepare and perform the short-term measures programme that aims at stabilising the business and eliminating the negative impacts of the financial–economic crisis, which had been affecting Sava's business already during several past years. 

The major activities of the past business year thus concentrated on the improvement in the operative business and the generation of a free cash flow in Sava Group companies on the one hand, and on the other hand in the regulation of relations with the lending banks, the search for possibilities and implementation of disinvestment programme and maintenance of current liquidity along with a regular settlement of financial liabilities of the company and the Group, respectively. As a result of the situation in the financial markets, the value of financial investments of Sava d.d. decreased again in 2011, whereas the indebtedness remained at a high level as already experienced in the period before the crisis. A the end of   2011, total financial liabilities of Sava d.d. otherwise decreased by €5.0 million to reach €309.3 million, and that of the Sava Group decreased by €10.7 million to reach €371.3 million.

Sales revenues of the Sava Group grew again in 2011 and surpassed the highest level from before the crisis. Sava Group companies generated sales revenues of €193.8 million, which is in accordance with plan and a 10% improvement on the previous year.   In the sales structure, Sava's divisions Rubber Manufacturing with the Foreign Trade Network had the largest share with 62%, being followed by Tourism with a 33% share, while the remaining 5% referred to the sales of other, smaller Sava's divisions.  

The costs lagged by 8 percentage points behind the revenues growth, which reflects the efficient rationalisation of business and a strict supervision over the costs in the entire Sava Group.    

Operative business of the largest Sava's division – Rubber Manufacturing – was the most efficient in the entire history of this division, while the performance of Tourism improved too, which verifies the efficiency of the implemented measures that aim at improving the operative business of Sava Group companies.  If the effects of single extraordinary events – impairments in Real Estate and provisions in Tourism -  had been excluded, the subsidiaries of the Sava Group would have generated an operating profit of €11.7 million, thereby doubling the profit generated in the previous year.      

Owing to the intense development activities, innovative products and effective marketingparticularly in the fast growing markets,  Rubber Manufacturing enhanced its sales by 10%, thereby surpassing sales plan by 6%.  Total profit of Rubber Manufacturing rose to €8.3 million, which is almost twice as much as in the previous year and by a quarter better than planned.   

Sales revenues of Tourism amounted to €64.8 million and were higher than planned and 7% better than in the previous year.  Owing to the formed provisions for not-utilised work hours and days off as well as severance pays upon the reorganisation and the formation of a uniform Sava Turizem d.d., the anticipated positive operating result of this division shifted to a loss, yet, already in 2012 these changes will be reflected in lower labour costs and a higher competitiveness.

As expected, sales of revenues of Real Estate were lower and greatly due to the impairments of inventories in the real property in Slovenia and Croatia.

While the Management Board and the management teams of subsidiaries were able to effectively face the challenging conditions for doing business in the real sector, the generated result was decisively affected by further adverse movements and circumstances in the financial markets.   

A further decline in stock exchange prices and the deteriorated economic environment substantially affected the real and banking sector business and requested for new impairments of financial investments of Sava d.d totalling €158.1 million, which caused a loss;  Sava d.d. thus ended the fiscal year 2011 with a net loss of €156.1 million, while the balance sheet total reduced by 27% and capital by 63%.  The share of capital in liabilities reduced to 21%. 

Due to the impairments of financial investments of Sava d.d. and to a lesser extent also due to the impairments of the inventory value in Real Estate, the Sava Group made a negative net operating result of €157.2 million, while the value of impairments at Group's level amounted to €160.3 million.

The operating result of Sava d.d., the parent company of the Group, was greatly affected by the impairments in connection with the operations of the associated companies, mainly Abanka Vipa d.d., NFD Holding d.d., and Maksima Invest d.d.; their share amounted to €118.9 million in total, or three quarters of total impairments Sava d.d. had to make. In addition to the impairments of financial investments the financial result was also affected by higher financial expenses as a result of a 16% increase in the interest rates.   Parallel with that, financial revenues totalling €17.2 million halved with regard to the previous year and the plan, as in the given economic situation the planned disposal of a 23.8% equity shareholding in Abanka Vipa d.d. was not doable.  The value of received dividends amounted to €11.3 million and chiefly referred to the dividends paid by the associated companies Gorenjska Banka d.d. and Abanka Vipa d.d.

As a result of the general movements in the capital markets in 2011, the value of the Sava share strongly decreased and stood at about €12 per a share at the end of the year.  With regard to the previous year, the book value of the share almost halved and reached the value of €82.2 at the end of the year, thereby still significantly exceeding the stock exchange prices. Sava d.d. used the retained profit from the previous years and other equity components that can be used for this purpose for covering a prevailing portion of the loss generated in 2011, whereas a portion of  a loss totalling €9.3 million remained uncovered.   

In its report, the Supervisory Board establishes that in 2011 Sava d.d. suffered the most serious consequences of the financial crisis ever, and in the given volume of indebtedness and a generally low availability and high price of loan sources the Management Board also had to face the hazards of current liquidity maintenance.  Under the framework of the performed short-term measures for maintaining liquidity and strengthening the financial position, the Supervisory Board wishes to point out one of the vital successes that the Management Board attained in 2011: the agreement with the lending banks on a postponement of payment of Group's loan liabilities, which the management plans to upgrade in 2012 as to agreeing the coordination of deadlines for Sava's financial liabilities over a longer period of time. The latter is one of the pre-conditions for implementing of Sava’s business-financial restructuring until 2014.     

According to the Supervisory Board, one of the most significant contributions by the Management Board of Sava d.d. in the past year was, by all means,  the preparation of the strategy for business-financial restructuring of Sava until 2014 adopted last September,  which brings radical changes in the manner of management, organisation, a portfolio structure of Sava d.d., and other strategic shifts for achieving a sustainable indebtedness level, recovering profitability and generation of a long-term value for company' s shareholders.

Sava's strategy Renewed for the Future pinpoints the clear guidelines for facilitating a successful development of the company on the consolidated financial basis, and the Supervisory Board firmly believes this is the path that leads Sava in the right direction, also in the circumstances of the present, volatile economic environment.  Its effective performance greatly depends on the full support by the financial partners – lending banks, on which the Supervisory Board relies on in the future too. 

Furthermore, the Supervisory Board establishes that the Management Board, consistently  implemented the strategic commitments from the first restructuring phase planned until the end of 2011 and successfully carried out a wide set of projects for a corporate renewal of Sava . The result of the performed revitalisation of the parent company is a new organisational structure of Sava d.d. and the changed model for managing the Group resulting in Sava that is leaner, a more simple in terms of organisational structure, cost-efficient and stronger in terms of managing and even more flexible and responsive.    The present corporate structure of Sava d.d. incorporates more clearly defined reporting lines and a decentralised decision-making model, which transfers a full accountability for operations to the level of subsidiaries.  This makes a more efficient management possible as well as supervision over their operations, to which the Management Board significantly aided by establishing a Directorate for Sava Group's management. After the completed reorganisation, Sava d.d. is better adapted to the current situation and future challenges also  in view of a significantly lower employee number. Already before the end of the year another complex project was efficiently completed: merging all companies in a uniform company Sava Turizem d.d. to facilitate the consolidation of operations, ensure higher cost-efficiency and strengthen the synergies in the operations of this Sava's  division. 

The Supervisory Board establishes in its report that in the given circumstances and business restrictions the Management Board effectively conducted the company and the entire Sava Group. The Supervisory Board furthermore points out that the strategic guidelines as set out in the restructuring strategy adopted last September need to be consistently performed in 2012. 

At the meeting the Supervisory Board became acquainted with the current developments and activities in the implementation of restructuring strategy of Sava, and a regular monthly report about business operations of the Sava Group and Sava d.d. in the period January-March 2012.

The Management Board of Sava d.d. briefed the Supervisory Board about the successful course of discussions with the banks on the future coordination of deadlines for financial liabilities of Sava d.d.    By the anticipated signing of the agreement on reprogramming, Sava will regulate the structure and maturity of sources in all Sava Group companies in the long range and will make a commitment for a timed disinvesting of investments and reducing the indebtedness to a long-term sustainable level.

The activities in connection with the disinvestment programme, which will assure the needed deleverage, are being effectively in progress in 2012.  After selling the entire,  27.0 % , stake in the associated company Job d.o.o.,  Sava d.d. finalised the sale of its total, 14.6% , shareholding in  Terme Maribor d.d. at the end of March.  Already some time ago, the Management Board classified Sava IP d.o.o., Ljubljana (now: Investicijsko Podjetje d.o.o.), which represents the major part of Sava’s real estate business, under the planned assets for sale. The necessary procedures for facilitating the implementation of the envisaged sale are carried out in accordance with plan.  Other projects for divesting investments, being currently in various implementation phases, are in progress too. 

After making a decision to discontinue the joint sale of a qualified stake in Abanka Vipa d.d., the Management Board of Sava d.d. still supports a tie-up between this bank and Gorenjska Banka d.d. as one of the most favourable scenarios for restructuring Sava’s investment portfolio.    

The results of business operations of the Sava Group and Sava d.d. in the first three months this year are very promising, which is due to further improvements in the operative performance of Group's companies.  In the first quarter 2012, Sava d.d. operated with a profit, while the operating result of the Sava Group significantly surpasses the achievements of the past year and the plan too. Despite last year’s record sales, the sales of Sava Group companies grew again this year and surpassed plans as well.  The consolidated report about the operation of the Sava Group and Sava d.d. in the period January-March 2012 will be prepared in May and published on 24 May 2012. 

The Supervisory Board dealt with and adopted the proposed Agenda and the proposed resolutions for the 18th Shareholders Meeting of Sava d.d. which will be held on Thursday, 24 May 2012 in the Hotel Kokra in Brdo, whereas the call of the Shareholders' Meeting will be announced on Monday, 23 April 2012.  

At the Shareholders' Meeting, the Supervisory Board of Sava d.d. will propose the Supervisory Board members – shareholder representatives, for the next four-year period as of 29 June 2012, as follows: Janko Kastelic, Miran Kalčič, Jože Obersnel and Stanislav Valant, MSc.

Sava d.d.
Corporate Communications


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