IC Market Espresso 1 Mar 2022

SPAN FY 2021 Results

In FY 2021, the Group noted an increase in revenues of 26.1%, an increase in EBITDA of 35.1% and an increase in net profit of more than 3x.

In 2021, operating revenues of Span Group increased 26.1% YoY, reaching HRK 774.1m. Software Asset Management and Licensing, which accounts for 71% of all revenues, noted an increase of 28% YoY, reaching HRK 544.8m. Meanwhile, all other segments noted a double-digit increase as well, with the Infrastructure Services, Cloud & Cyber Security segment noting the highest relative increase of 32%.

Operating expenses reached HRK 747.2m showing an increase of 25.3%. The expenses for goods and services sold increased due to an increase in related revenue. Employee costs increased by 17%, amounting to HRK 138.6m due to a higher number of employees (an increase from 495 to 537 employees). Costs of goods sold reported an increase of 27.7%, which is app. in line with sales growth, so their share in sales remained almost the same and amounted to c. 66%.

The above-mentioned led to EBITDA of HRK 42.5m, showing an increase of as much as 35.1% YoY. Such a result puts EBITDA margin at 5.5% (+0.4 p.p. YoY). Net financial result improved slightly due to lower fx losses this year.

Going further down the P&L, operating profit amounted to HRK 26.9m, noting an increase of 55.7% YoY. In 2021 net profit reached 24m, which represents an increase of 3x YoY. Also, net profit margin for the company increased by 1.9 p.p., amounting to 3.1%.

Producer Prices of Industrial Products up 20.7% YoY in January 2022

Producer prices of industrial producers on the domestic market increased by 20.7% YoY in January. The increase was mostly driven by an increase in the energy sector, however, if we were to exclude it, the increase amounts to only 5.7%.

Croatian Bureau of Statistics published new data on the trends in the industry sector, which reveals that the industrial producer price index went up by 20.7% on the domestic market. Excluding the energy prices, the total industrial PPI increased by 5.7% YoY in January 2022.

The increase is supported by other industrial sectors. Food production sector prices increased by 6.2%, beverage production sector went up by 0.9%, capital goods increased by 3.2%, durable consumer goods went up by 5.1%. All this is significantly impacting domestic producers which have made them increase prices to end consumers.

The growth of natural gas and oil prices is a direct result of increased demand in Asia (especially China and Japan) as well as the increased need for these energy sources in countries like Germany due to the shutting down of nuclear reactors. This is supported by the political situation in Europe which is marked by Ukraine – Russia invasion that has all created strong upward pressure on prices of these commodities. All this has resulted in a considerable increase in energy prices, which increased by 57.6% YoY.

Analysing this even further, the main category which drives the energy sector price increase is indeed the mining and quarrying sector, which increased almost four-fold YoY. The main driver of this increase inside the sector is the extraction of crude petroleum and natural gas, which increased almost five-fold YoY, which further supports the sentiment that the energy price increase was driven by these commodity price increases.

However, even with all increases, the PPI numbers on the domestic market remain on a similar level in the last 3 months (19.8% in November, 19.6% in December, 20.7% in January). This suggests that the worst of the price increases is over, barring some events that might disrupt the supply of natural gas and oil (like further escalation of Ukraine – Russia situation).

Producer prices of industrial products for each month (% YoY)

Transgaz FY 2021 Results

In 2021, Transgaz recorded an increase in revenue of 2% YoY, an increase in EBITDA of 16.7%, and a net profit of RON 166.9m, a 1% increase YoY.

In 2021, Transgaz recorded a 2% YoY increase in operating revenue before the balancing and construction activity, which amounted to RON 1.33bn, mainly influenced by higher commodity revenue (+ RON 9.7m) due to higher gas transmitted capacities.

The commodity tariffs decreased in 2021 compared to 2020 mainly due to the Order 10/2017 of the ANRE President on the amending of Order 32/2014 of ANRE President on the approval of the Gas Transmission Regulated Revenue, Total Revenue and Regulated Tariffs Methodology, which establishes the increasing by 5% per year of the percentage by which the approved revenue is recovered by the application of the capacity booking tariff, up to 85%, and the decreasing of the percentage by which the approved revenue is recovered by the application of the commodity tariff. The revenue from the balancing activity was higher by RON 242.9m due to the higher trading price.

Operating costs before the balancing and construction activity increased by 5% YoY (or RON 62.5m) mainly due to increases in depreciation (+44.6% or RON 111m), which is based on the completion and commissioning of major investment projects, as well as higher employee costs (+7.6% or RON 33.2m). At the same time, the cost or royalty (the Company pays 0.4% of the value of gross revenue from the gas transmission and transit operations through the transmission systems in the public property of the state, as compared to 10% before), and as such, they saved RON 102.8m (or reduced their royalty fees by 95.4%).

As a result, the Company’s gross profit amounted to RON 231.9m, an increase of 16% YoY. At the same time, the Company’s net profit amounted to RON 166.9m, a 1% increase YoY.

Transgaz Key Financials (RON)