General Assembly 14.06.2017 Contents
• Macroeconomic environment
• Operation by segments
• Company’s strategic restructuring
• Tourism
• Health Food
• Insurance
• Adris grupa
1 The second straight year with a growth provides the necessary optimism. Yet, recovery is considerably slower than the average of peer countries.
Croatian and comparable countries’ economy since the start of recession Real GDP index, 2008=100
111
108 EU10*
105
102 100 99 100 98 97
94 93 92 93 91 91 91 HR 89 89 88 88
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Source: Eurostat, HGK calculations, estimates for 2016 and 2017
* EU10: Bulgaria, Romania, Poland, Czech Republic, Slovakia, Lithuania, Estonia, Latvia, Hungary and Slovenia 2 Croatia is the biggest loser of the recession. Long-term forecasts show one of the lowest growth rates in the wider CEE region.
Annual Growth Rate (CAGR*) of real GDP Realised 2008 - 2016 Projection 2017- 2021 CAGR* % CAGR* %
Poland 3.1 Romania 3.6
Romania 2.5 Slovakia 3.6
Slovakia 2.3 Bulgaria 3.6
Bulgaria 1.7 Serbia 3.4
Slovenia 0.9 Poland 3.1
Serbia 0.8 Hungary 2.2
Hungary 0.6 Croatia 2.1
Croatia -1.0 Slovenia 1.8
Average 1.4% Average 2.8%
Source: IMF
*CAGR = Compound Annual Growth Rate 3 The slow recovery is the result of declining competitiveness
Competitiveness compared to surrounding countries The Global Competitiveness Report Rank compared to the beginning of the Rank 2016*; EU 10 crisis Rank 2016 vs 2008*; EU 10 Estonia 30 Estonia -3 Czech Republic 31 Czech Republic 2 Lithuania 35 Lithuania 3 Poland 36 Poland 15 Latvia 49 Latvia -4 Bulgaria 50 Bulgaria 29 Slovenia 56 Slovenia -17 Romania 62 Romania 12 Slovakia 65 Slovakia -24 Hungary 69 Hungary -22 Croatia 74 Croatia -17
EU10 average 48
Source: The Global Competitiveness Report 2016 – 2017, World Economic Forum
*Includes 138 world economies, among which Switzerland is ranked as the most competitive 4 A low level of confidence in institutions necessary for creating a favourable investment environment
Citizens’ trust in judiciary system Share of positive answers*, in %
Croatian Army 90
Police 72
Tax Administration 50
State Attorney’s 39 Office
Courts 38
Building permit 37 institutions
Government 29
Source: IPSOS
*Per Likert’s 5 degree scale – only positive answers such as „completely agree” and „mostly agree” have been taken into consideration 5 Contents
• Macroeconomic environment
• Operation by segments
• Company’s strategic restructuring
• Tourism
• Health Food
• Insurance
• Adris grupa
6 Adris today has three businesses that are sustainable in the long term*
Tourism Health Food
Insurance
* A strong investment cycle worth almost HRK 4 billion in tourism, health food and insurance regionalisation supports the growth and development plans aimed at further increasing the value of the company 7 Over the past five years, Adris has…
… invested more than… HRK 4 billion
30 X
…been achieving an average HRK 427 million annual net profit* of …
100 X
* not including a positive impact of the transaction 8 Over the past five years, Maistra has boosted its operating revenues by 38 percent, while increasing its net profit by 2.4 times
Maistra d.d. - business indicators Operating revenues Net profit In HRK mm In HRK mm +5% +38%
2.4 X +19%
950 998 156 131 689
55
2012 2016 2017 2012 2016 2017
9 Adris’s Cromaris increased its sales revenues by almost eight times
Cromaris d.d. - business indicators Sales revenues Net profit In HRK mm In HRK mm +8% +45% +8 X
+27 HRK mm
19 13
382 352
-13
43
2008 2016 2017 2008 2016 2017
10 Upon entering Croatia osiguranje’s ownership structure, we have carried out a financial and organisational restructuring of the company. In 2016 the net profit was up by 54 percent compared to the year 2015.
CO group - business indicators Net profit In HRK mm
+29% +54%
+579 226 175 114
-465
2014* 2015 2016 2017
Note: 2015 was the first full year under Adris grupa management
* takeover 30.04.2014 11 Thus, the increase in profit from new businesses completely offset the tobacco division operation
Adris grupa - financial results Consolidated net profit in HRK mm +6%
501 471
Average Portfolio Restructuring 2016 2009 - 2013 2014 - 2015
12 In the period between 2012 and 2016 all of the above provided for...
…an average annual dividend 21% growth (not including extraordinary dividends) of…
…average annual stock price 30 X increase… ADRS-P-A 16%
100 X ADRS-R-A 24%
13 Contents
• Macroeconomic environment
• Operation by segments
• Company’s strategic restructuring
• Tourism
• Health Food
• Insurance
• Adris grupa
14 Tourism is a growing business and the demand for Croatia has been increasing faster than the rest of Europe and the world
Growth in tourist demand in 2016* Growth in the number of tourist arrivals in %
+5.1 pp +7.0 pp +7.6 pp 9.0
3.9 2.0 1.4
Croatia World Europe Southern Europe (Mediterranean)
Source: Croatian Tourism Organisation, UNWTO
* Records for the periods I-XII 2016 vs I-XII 2015 15 With the investment of HRK 490 million in 2016 a new investment cycle was launched, worth more than HRK 2 billion by 2021
Continuing the portfolio premiumisation process Portfolio investment* 2015-2021 Maistra hotels Share of 4 and 5*
Category capacity Circle size representative of amount invested
Hotel Hotel Hotel Monte Mulini Camp Park Lone HRK 68 mm Veštar HRK 553 mm HRK 25 mm HRK 78 mm 5*
Hotel Katarina Hotel HRK 210 mm 95% Camp Family World Eden 4* Polari Amarin Hotel HRK 60 mm 76% Amarin HRK 130 mm HRK 150 mm HRK 300 mm
3* 17%
2016 2017 2018 2019 2020 2021 2005 2016 2020
Year of market entrance
* additional investments in Vrsar by 2020 approximately HRK 450 million 16 An innovative hotel product by which Maistra continues creating a top hotel offer in order to establish its position in the growing premium segment
Family Hotel Amarin Category: 4*, family hotel
• Soft opening 18 August 2016 • The biggest investment in Istria's tourism this year, worth over HRK 300 million • 280 accommodation units with the capacity of almost 1,000 guests • Seven indoor and outdoor pools, wellness and spa zone covering 1,500 square metres, • Six catering facilities and a number of children playgrounds and playrooms
17 Maistra’s sales policy is oriented towards increasing the share of direct sales channels, which is today 36pp higher than it was in 2011. Consequently, average sale prices are on the rise as well.
Sales channels management Maistra d.d. sales structure in % of accommodation revenues
33% 30% 42% 38% 50% Indirect 66% channel
+36pp
67% 70% 58% 62% 50% Direct 34% channel
Average 2011 20122013 2014 2015 2016 CAGR* accommodation price – hotels 486 581 593 614 667 710 8% (per room, in HRK) + 8%
*CAGR ( Compound Annual Growth Rate) 18 In 2016 prices were up by 6 percent, bed nights by 3 percent…
Business indicators Number of bed nights Average bed night price In 000 In HRK
+3% +7% +3% 230 +3% +6% 215 +7% 203 190
3,133 3,231 2,970 3,054
2014 2015 2016 2017 2014 2015 2016 2017
19 … which led to increase in revenues and operating profit, improving net profit by 28 percent.
Financial business indicators Revenues and profitability of Net profit operation In HRK mm In HRK mm (mark-up %) +5% 998 +19% +10% 950 +8% 867 +28% Prihodi 805
+3%
156 131
99 102
221 239 EBIT 159 202 (23%) (23%) (24%) (margin) (20%)
2014 2015 2016 2017 2014 2015* 2016 2017
20 The Hilton Dubrovnik proved to be a successful acquisition as part of the policy of investing in the top hotel segment
Business indicators – Grand hotel Imperial Occupied units Revenues and profitability of operation In 000 In HRK mm (mark-up %)
+4% +1% +7% +2% 65.8 +2% +7% 60.2 61.7 56.0
36.0 36.3 34.0 34.7
17.3 EBIT 13.0 15.9 (26%) (26%) (margin) 7.5 (22%) (13%) 2014 2015 2016 2017 2014 2015 2016 2017 Net 5.5 8.0 12.2 13.7 profit
Note : Acquisition completed in September 2014
21 In the first four months the tourism business achieved 30 percent more bed nights, with a 3-percent increase in prices
Business indicators, I-IV 2017 Number of bed nights Average bed night price In 000 HRK
+30% 243 +3% 235
221
170
2016 2017 2016 2017
Note : Including the operation of the Grand Hotel Imperial Dubrovnik
22 A strong growth in booking compared to the previous year indicates a growing demand and continuation of positive trends
Booking as of 08.06.2017 Units sold Gross sales revenues In 000 In HRK mm
565 550 616 581 104 +5% 65 97 139 +17%
460 485 Booking 519 Booking (82% ) (88% ) to date 442 (84% ) to date (76% )
2016* 2017** 2016* 2017**
*Booking “as of” in 2016 compared to I-XII 2016 results **Booking "as of” in current year compared to the I-XII 2017 plan 23 Contents
• Macroeconomic environment
• Operation by segments
• Company’s strategic restructuring
• Tourism
• Health Food
• Insurance
• Adris grupa
24 The growing global demand for fish is primarily being met by aquaculture
Projection of global fish production Total production In mm tonnes CAGR* % 2000-2020 300
250 CAGR* +3%
200 Aquaculture +7%
150
100
50 Wild catch -0%
0 1970 1980 1990 2000 2010 2020
Source: PwC Analysis, FAO
*CAGR ( Compound Annual Growth Rate) 25 The proximity of the Italian market, Europe’s biggest sea bream and sea bass market, is a major competitive advantage, with a further growth potential
Sources of growth Proximity of Italian market and CE market Export revenues Delivery in hours % in revenue share, Cromaris
>12 h N & E Europe 12-24 h In 000 tonnes Production 0.1 24-48 h Import 21.5
Italy 84% In 000 76% tonnes 18.4 Production 73.0 50% Import
2012 2016 2021
Source: APROMAR , McKinsey
26 Cromaris is on a stable path towards achieving the production target of 10,000 tonnes by 2018
Growth trend 2008-2018 sales Growth In tonnes 10,025 • From 2008 to 2016 sales were increased by more than 6 times
• Investment cycle focused on new capacities 6,889 and vertical integration is a prerequisite for growth and higher production efficacy
• The economy of scale and brand development are the pillars of Cromaris’ sustainability and profitability 1,102 • By 2018 the goal is to reach 10,000 tonnes. • We seek sources of growth in export , which 2008 2016 2018 accounts for three quarters of our sales.
27 In 2016, positive trends in volume and price increase continued…
Physical business indicators Sales volume Average prices In tonnes HRK/kg
+7% +2% +1% +10% 51.1 51.7 +5% 50.0 +17% 45.6
7,375 6,573 6,889 5,629
2014 2015 2016 2017 2014 2015 2016 2017
28 … generating strong growth of revenues and net profit.
Financial business indicators Operating revenues Net profit In HRK mm In HRK mm
+5% 380 +6% 362 +26%
+45% 271 +2x
380 19.0 342 362 +5x 271 13.1
6.5
1.2 2014 2015 2016 2017 2014 2015 2016 2017
29 Cromaris employs high-price policy despite the strong pressure by Turkish and Greek producers. Physical indicators are expected to improve by the end of the year.
Physical business indicators, I-IV 2017 Sales volume Average prices In 000 tonnes HRK/kg
-2% -2% 52.6 51.3
2,014 1,965
2016 2017 2016 2017
30 Thanks to the improved cost efficiency, Cromaris continued to increase operating and net profits in the first four months of 2017
Financial business indicators I-IV 2017 Operating profit – EBITDA Net profit in HRK mm In HRK mm
+24% 3X
2.3
17.3 13.9
-1.0
2016 2017 2016 2017
31 Contents
• Macroeconomic environment
• Operation by segments
• Company’s strategic restructuring
• Tourism
• Health Food
• Insurance
• Adris grupa
32 Unconsolidated and poorly arranged Croatian market, both from owners and business viewpoint, offers significant growth potential, even in comparison with Central European markets
EU market insurance in 2015
Gross premium %GDP 8.0 7.5x Europe
6.0 DE
SI AT
4.0 3.5x PL HR CZ SK HU 2.0 BG RO
0.0 0400 800 1,200 1,6002,000 2,400 2,800
Premium per capita EUR Source: Insurance Europe
33 Financial and operational restructuring of the company successfully completed, laying ground for further growth
The process of financial and operational restructuring of CO d.d. Restructuring costs 2014-2016 Structure and number of employees In HRK mm in % * 2,715
Real-estate 484 2,379
Sales 23% 1,975 Financial 158 investment 62%
Severance 157 67%
Other 127 Admin. 77%
38% 33% Total 926 Existing state 2016 2021
Note : 2015 was the first full year under Adris grupa management
* takeover 30.04.2014 34 The negative trend was stopped and market share stabilised, while confirming the leading position as the most powerful insurance brand in Croatia...
Croatia osiguranje brand CO+CZO market share Brand awareness in % % Croatian market
Croatia osiguranje 89
Euroherc 75
Allianz 74
29.1 Jadransko 62
28.7 Grawe 43
Generali 36
Triglav 33
Uniqa 29 2005 2014* 2016
Source: HUO Source : GfK Market Research
Note : 2015 was the first full year under Adris grupa management
* takeover 30.04.2014 35 ...consequently, premium was increased and efficiency improved at the level of the entire company...
Physical business indicators of CO Group Gross premium charged Combined operating ratio** in HRK mm in %, +4% 116.9 -11% +3% +2% -4% 103.8 -2% 99.5 97.7
3,145 2,868 2,968 3,018
2014* 2015 2016 2017 2014* 2015 2016 2017
Note : 2015 was the first full year under Adris grupa management
* takeover 30.04.2014 ** for non-life insurance only; ration between total operating costs and premium earned 36 … resulting with a strong growth, with HRK 175 million in net profit.
Financial business indicators Net profit In HRK mm
+29% +54%
+579 226 175 114
-465
2014* 2015 2016 2017
Note : 2015 was the first full year under Adris grupa management
* takeover 30.04.2014 37 A number of strategic initiatives were launched to fortify the leading position in the Croatian market and sustainability of the company
Continuation of restructuring process Net profit CO Group In HRK mm
Recovery Investment Growth
• Growing • Total client regional orientation player
• Complete • Sustainable, • New products business profitable digitalisation 175 business • Restructuring 114 • Operative (employee efficiency structure)
• Process 465 optimization (centralization)
2014 2015 2016 2018
Note : planned net profit for 2016 has been achieved 38 Positive trends continued in the first four months 2017. A slight increase in premium, with a growth of operating efficiency...
Physical business indicators CO Group, I-IV 2017 Gross premium charged Combined operating ratio* in HRK mm in %,
+0.4% 97.0 -1% 96.4
1,299 1,304
2016 2017 2016 2017
* for non-life insurance only; ration between total operating costs and premium earned 39 … resulting with a 61-percent increase in net profit year-on-year.
Financial business indicators CO Group, I-IV 2017 Net profit In HRK mm
+61%
95
59
2016 2017
40 Contents
• Macroeconomic environment
• Operation by segments
• Company’s strategic restructuring
• Tourism
• Health Food
• Insurance
• Adris grupa
41 After having completed the restructuring process, Adris continues with successful operation
Consolidated financial business indicators Adris grupa total revenues Adris grupa net profit In HRK mm in HRK mm +16% -13% +27%
+22%
6,364 501 5,485 5,552 393 322
2014 2015 2016 2014 2015 2016 After minority interests (mm Hrk) 365 374 446 SBU Tobacco * SBU Tobacco * (mil kn) 1,917 1,358 (mm Hrk) 181 93
Note : Does not include capital gain from the sale of SBU Tobacco in 2015
* Consolidated revenues and net profit of SBU Tobacco and Retail 42 We are employing a reasonable dividend policy, stimulating for the shareholders. Over the past five years the regular dividend has been growing at an average rate of 21 percent a year, while an extraordinary dividend was paid out in 2015. Dividend policy 2012-2017 dividends HRK/share
Extraordinary dividend 40.0
+21%
15.0 17.0 Regular 10.0 dividend 7.0 7.0 7.0
20122013 2014 2015 2016 2017
43 Despite a balanced dividend policy, the achieved dividend yield exceeded the five-year average in the Croatian market
Dividend policy Dividend yield 2012 - 2016 in %
5.5% 4.7% 3.9%
ADRS-R-A ADRS-P-A CROBEX ®
Source: ZSE; CROBEX ® - official index of Zagreb Stock Exchange
44 Share market price growing in 2016 and onwards
Share price developments ADRS-P-A* ADRS-R-A* In HRK In HRK
558
+24% 412 418 +16% 370 +33%
309 +11% 310 312 280 239 224
2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 Source: ZSE Source: ZSE
*Average annual share price for 1.1-31.12 45 The average annual return on shares since 1994 has been approximately 27 percent.
Total average annual return per share TSR - Total Shareholders Return* (%)
Adris P-A +26.6%
Adris R-A +27.4%
*TSR ( Total Shareholder Return includes the growth of the share price and dividend in the given period (1994 – 2016). 46 Over the next four years Adris will invest HRK 4 billion in growth and development of its operations, mostly from its own assets
Investment cycle 2017- 2020 Investments structure In HRK mm
4,012
1,530
2,102 380 450
1,652
Tourism* Health Food Other Total
* HRK 450 million in investments in Vrsar, not part of the strategic plan. Not including investments in Split and Zagreb 47 Adris today has sustainable and growing businesses, with a vision of further growth, development and value creation for the shareholders
• Fully restructured portfolio; Sustainable • Adris has opted for operations with growth and demand rates that are and growing operations stable in the long run; • Operations are not highly concentrated and globalised;
• results in all three operations show a growth trend of key Results so far business indicators – volumes, revenues and profits;
• Growth and development concept of our operations supported by Further increase in investments worth HRK 1 billion annually over the next four years; shareholder • Reasonable dividend policy, stimulating enough for shareholders, while value providing for further growth and development of the company.
48 General Assembly proposal decisions
Profit allocation: (1) It is establishedthat the total profit after taxes for the year 2016 amounts to HRK 235,724,920.36.
(2) The total profit recorded in the year 2016, after taxes, in the amount of HRK 235,724,920.36, shall be allocated to the Company’s Statutory Reserves.
Retained profit: (1) It is established that, based on the completed process of acquiring the company Tvornica duhana Zagreb d.d., Rovinj, Obala Vladimira Nazora 1, OIB: 67689631853 in 2016, by Adris grupa d.d. and the change of accounting standards, the total retained profit amounts to HRK 378,468,078.51.
(2) The total retained profit from item I herein, in the amount of HRK 378,468,078.51, shall be allocated to the Company’s Statutory Reserves.
49 General Assembly proposal decisions
Dividend: (1) From the statutory reserves, generated and accumulated by the Company’s operation until the year 2000 and from 2005 to 2012, the amount of HRK 244,000,000.00 shall be set aside to non-allocated retained profit.
(2) From the Company’s non-allocated retained profit, HRK 278,800,000.00 shall be allocated to dividends, in the amount of HRK 17.00 per share.
(3) The dividend set forth in item II herein shall be paid out on 21 July 2017 to the accounts of the shareholders based on the status in the Central Clearing and Depository Company as of 30 June 2017.
(4) The dividend referring to own shares shall be retained in Company’s non-allocated profit.
(5) This Decision shall come into force after it is adopted by the Company’s General Assembly
50