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Kranj, 27 August 2010- At yesterday's, 17th regular meeting, the Supervisory Board dealt with and adopted the interim report of the Sava Group and the parent company Sava d.d., and become acquainted with the monthly report for the period January-July 2010. When discussing business results it devoted a special attention to the movement of the Sava share price on the Ljubljana Stock Exchange, repurchasing treasury shares and current events in connection with the investments Sava d.d. has in Merkur d.d.
The economic environment in the first half-year was still not in favour of the operations of Sava Group companies. All companies further concentrated on the implementation of anti-crisis and development measures. The greatest positive effects were observed in Rubber Manufacturing with the foreign trade network, which makes excellent results despite the crisis situation. The operation of Sava d.d. and thus the entire Sava Group was strongly affected by the extraordinary and unplanned events in the form of impairments of financial investments and receivables. Sava d.d. carried out these impairments mainly due to the aggravated situation, which Merkur d.d. and its majority owner Merfin d.o.lo. had faced, and partly due to low share prices in the capital market. The interim report verifies that guesses of certain media that Sava at half-year would improve its result through revaluating certain investments upwards, does not hold true, as Sava d.d. did not change the existing accounting policies.
In the first half-year, Sava Group companies made sales revenues of €82.5 million, which was 4% below last year result in the same period, and 4% below semi-annual plan. The reasons for deviations were lower sales revenues in Tourism and a delay in selling buildings in Real Estate, which the companies from this division already compensated in July. Rubber Manufacturing made 63% of total sales, Tourism 32%, Real Estate 2%, the remaining 3% referred to Sava's energy management and other operations.
The largest Sava's division Rubber Manufacturing made sales revenues of €53.5 million, thereby enhancing sales by 21% in comparison with the first half of the previous year, thereby surpassing the semi-annual business plan by 7%. Along with the market revival high sales results were due to a successful work in the development of industrial rubber products and their efficient marketing. Tourism companies generated sales revenues of €26.9 million in the first half-year. Compared to last year, they made a 2% increase in the number of overnight stays, but the revenues value was 3% lower on account of price pressures and a general trend of decrease in private spending. Owing to a changed dynamics in selling the buildings Real Estate generated revenues of €2.6 million at half-year. Other Operations, with a focus on energy management business, increased their sales by 18%, to €2.6 million.
Rubber Manufacturing companies operated with a profit of €3.3 million, which substantially surpasses the values from last year and plan as well. The result in other divisions was negative, despite that Sava Group companies improved their last semi-annual result by 33% or €0,.5 million.
The results until the end of July and current forecast show that this year's business performance of Rubber Manufacturing will be above the expectations, while Tourism will have to introduce additional measures to improve the efficiency of operations. The July sales result guarantees the implementation of the annual plan in Real Estate.
Total value of dividends, which Sava received in the first half-year amounted to €28.8 million. Dividends which Sava received from subsidiaries based on decisions by their general assembly amounted to €17.0 million. These financial revenues were shown in the separate financial statements of Sava d.d. only, and do not influence the business performance of the Sava Group.
Revenues of Sava d.d. from the profit of associated companies, which referred to paid dividends of Gorenjska Banka d.d. and Abanka Vipa d.d., achieved the value of €11.8 million, or 5% less than in the same period last year. The attribution of the profit of associates, which is possible in accordance with the equity method and could improve the interim result of Sava d.d., was not carried out. The decision about attributing the profit at the end of the year will depend on the movement of stock exchange prices and any other reasons that could require refreshing last year’s evaluation of both banks.
Due to the performed impairments of financial investments, the Sava Group finished the first half-year with a loss of €40.6 million, instead generating a profit of €3.9 million. Instead of a total profit of €5.8 million Sava d.d. made a loss of €20.8 million. The result was negatively affected by impairments of the receivable due from Merfin d.o.o. in the amount of €33.8 million and additional impairments of financial investments available for sale totalling €9.8 million that were due to the extremely low prices of securities in the stock exchange market; the result was positively affected by revenues from dividends from subsidiaries of the Sava Group in the amount of €17.0 million.
The performed impairments decreased the balance sheet total of the Sava Group, which at the end of June totalled €847.4 million and was 10% lower in comparison with the end of 2009. As a consequence, the capital of the Sava Group decreased by 17% in comparison with the end of the year. Owing to a successful financial reprogramming at the end of April, the structure share of short-term financial liabilities decreased. Total financial liabilities of the Sava Group were 4% lower than at the end of the year and amounted to €399.7 million at the end of June.
At half-year, the accumulated profit of Sava d.d. totalled €9.4 million; it was lower if compared to the end of 2009, which was due to the performed impairments and payment of dividends to the shareholders of Sava d.d. Based on the June Shareholders’ Meeting decision the shareholders of Sava d.d. received a dividend of €3.2 per share, which was 3% more than last year. The total amount of paid dividends to Sava shareholders amounted to €6.4 million.
The Board of Management of Sava d.d. pointed out that the implementation of a stable dividend policy despite the present unfavourable business results on account of impairments in connection with the investment in Merkur d.d. will not be endangered. Sava d.d. namely has other revenue reserve in the amount of €61.5 million available, which was formed for the case of negative business deviations and based on the decision by the Board of Management it can be reallocated into the accumulated profit.
When discussing the business results, the Supervisory Board of Sava d.d. devoted its special attention to the movement of the Sava share price in the Ljubljana stock exchange and repurchasing treasury shares.
The Board of Management of Sava d.d. estimates that the Sava share is strongly undervalued, therefore it began to repurchase treasury shares via the Ljubljana stock exchange in the past week to increase the assets of all shareholders. The effects of increasing the share liquidity and, correspondingly, the Sava share price have already shown.
The Board of Management of Sava d.d. informed the Supervisory Board members about concluding an agreement, which regulates mutual relations with Merfin d.o.o., the majority owner of Merkur d.d., and was made on the basis of a consent by the Supervisory Board. By signing this agreement Sava d.d. changed the receivable due from Merfin d.o.o. in a 9.16% ownership stake in Merkur d.d. After shares were booked over on 25 August 2010, Sava d.d. increased its present, a 10.01% shareholding, to a 19.17% shareholding in Merkur d.d. in total.
Sava d.d.
Corporate Communications
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