Dear sir/madam,

Ljubljana Stock Exchange, in partnership with InterCapital Securities, is organizing an investor Webinar “Slovenian Listed Companies Online”, which will take place via Zoom e-platform on August 31, 2022, 1:10 pm.

Following Slovenian Capital Market Overview, investors will have the opportunity to listen to presentations of six Slovenian Blue Chips, which will, among other things present financial results for the first half of the financial year 2022 in the following order:

13:10	InterCapital Securities	Slovenia Capital Market Overview
13:30	Cinkarna Celje	Mr Filip Koželnik, Member of the Management Board, Head of IR
14:00	Krka	Mr David Bratož, Member of the Management Board and Mr Brane Kastelec, Director of Finance
14:30	Petrol	Mr Matija Bitenc, Member of the Management Board and CFO Mrs Barbara Jama Živalič, Executive Director of Finance and Accounting
15:00	Triglav Group	Mr Uroš Ivanc, Member of the Management Board – CFO and Mrs Helena Ulaga Kitek, Head of IR
15:30	NLB	Mr Blaž Brodnjak, President of the Management Board and Mr Peter Jenčič, Analyst Advisor
16:00	Sava Insurance Group	Mrs Polona Pirš Zupančič, Member of the Management Board and Mr Tadej Mendiževec, Director of Financial operations and asset management

After each presentation, the Q&A session will also take place. Don’t miss the unique opportunity for the companies’ representatives to answer your questions personally, or send the questions prior to the event to [email protected].

You can register for the event via the following link or with a Webinar ID: 811 2030 2470

We kindly invite you to attend the event!

With kind regards,

InterCapital Securities

Today, we decided to bring you an analysis of the current ratio of the Croatian Blue chips, based on the H1 2022 results.

First of all, what is a current ratio? The current ratio is what’s called a „liquidity ratio“, meaning in essence, it indicates how well a company is able to pay its short-term obligations, meaning within one year. It is calculated by looking at the balance sheet of a company and dividing its current assets by short-term liabilities. This means in turn, it can show us how a company can use its current assets to satisfy any current debts it might have.

It is important to put this ratio into context, however. Even though a high ratio (more than 1) does indicate that a company has more current assets than short-term liabilities, taking the industry and the peer group of a company into account matters as well. Different industries and peer groups have different current ratios, so if a company has a lower current ratio than the industrial average it operates in, there might be a higher risk of trouble down the road. At the same time, a company that has a current ratio that is a lot higher compared to its industrial average might also mean that the company’s management is not using its assets in the most efficient way.

Because of this need for industry-specific comparison, comparing the current ratio across industries does not make much sense. With that out of the way, let’s take a look at the current ratio of the Croatian Blue chips, based on the H1 2022 results.

Current ratio of the CROBEX10 Constituents (H1 2022 vs. H1 2021)

Out of all the observed companies, Hrvatski Telekom has the highest current ratio, at 3.15x. Compared to the same period last year, this represents an increase of 10%, which can mainly be attributed to the fact that HT has managed to moderately decrease its short-term liabilities, from HRK 1.63bn to HRK 1.6bn, while current assets reported a 5% YoY increase.

Next up, we have Ericsson NT, with a current ratio of 2.25x, representing an 11.8% increase YoY. The main contributor to this growth is the decrease in short-term liabilities, which declined by 9% and amounted to HRK 455k (from HRK 500k).

Next up, we come to Podravka, and considering we also have Atlantic Grupa which operates in the same industry, we can compare both of these companies. Podravka has a current ratio of 2.24x, while Atlantic Grupa has 1.43x. As compared to H1 2021, this represents a change of -8.2% and +5.2%%, respectively. This would mean that Podravka does have more current assets compared to its short-term liabilities, and would mean that in case they needed to, they could cover them more quickly. Podravka reported a decrease in the current ratio as growth in liabilities (+11%) outpaced a very slight growth in current assets amounting to 2%. Atlantic improved its liquidity measure due to moderate growth in current assets (+14.9%), which was driven by more or less each component. Considering both of these companies are actively looking for new ways of expanding through mergers and acquisitions, the focus on further reducing any form of debt is expected.

Next up, we have Atlantska Plovidba, the Company which experienced the most significant change in its current ratio is Atlantska Plovidba, which increased it by more than 2.5x YoY, with a current ratio amounting to 2.4x. This increase was driven by the strong business results of the Company, and as it operates in the asset-heavy industry (shipping), which has experienced a lot of demand in 2021 and the 1st half of 2022. This has allowed the Company to build a significant cash position, increasing it from HRK 91.5m to HRK 258.2m. This led to an increase in the current assets of 197% YoY, while the Company increased its short-term liabilities just slightly by 12.7% YoY.

Following Atlantska Plovidba, we have Končar, which has a current ratio of 2.14x, representing a decrease of -18.1% YoY, due to an increase in short-term liabilities of 74.1%. Next up, we can take a look at Valamar Riviera, Adris, and Arena Hospitality Group, which all (at least partly in the case of Adris) operate in the tourism industry, so comparing their ratios makes sense. Although, we note that the picture for Adris is relatively skewed due to the nature of Adris’s business and consolidation of its insurance segment, which disrupts both sides of its balance sheet- current assets and short-term liabilities. Nevertheless, Valamar has a current ratio of 1.32x, Adris 1.16x, and Arena has 0.8x. This represents a change of +13.3%, -6.2%, and -36.7%, respectively. The sharp increase experienced by Valamar can be attributed to the increase in current assets (+61.7% YoY), or more specifically, an increase in cash and cash equivalents (+47.3% YoY), outpacing growth in short-term liabilities (42.7%). Considering that the Company operates in the tourism industry which was already severely affected by the COVID-19 pandemic, this makes sense, as the Company is increasing its cash position to mitigate any future risks. At the same time, its subsidiary Imperial Riviera had a capital increase, where co-owner with Valamar PBZ-CO pension fund increased share capital by payment of cash, while Valamar increased it by transferring land pertaining to Dubrovnik hotels that Valamar sold to Imperial. As Valamar is consolidating Imperial, Valamar’s consolidated results liquidity position also improved. On the other hand, the decrease experienced by Arena can be attributed to an increase in liabilities, (+46% YoY), while at the same time, the current assets decreased, mainly due to the lower cash position (-28.2% YoY). Arena is investing a lot and 50% of all its investments are funded by debts so its debt position also increased. This is a very good move in the period of low-interest rates, where Arena is fixing its rates at lows.

By the end of July 2022, the NAV of Croatian mutual funds decreased by 18.7% YoY but increased by 0.9% on an MoM basis. This would mean that by the end of the month, the NAV amounted to HRK 16.8bn.

The Croatian Agency for the Supervision of Financial Institutions, i.e. HANFA, has published the latest monthly report on the developments in the Croatian financial markets for July 2022. Looking at the performance of the Croatian mutual funds can give us a general sentiment of how the market is doing, as these funds play a major role in the Croatian financial market. As can be seen in the published report, in July 2022, the NAV managed a slight recovery on an MoM basis, increasing by 0.9%, and ending the month at HRK 16.8bn. On the YoY or YTD basis, however, the trend is still negative, with the NAV decreasing by 18.7% and 21.7%, respectively. In fact, looking even further back, the NAV of the mutual funds is 27% lower than it’s pre-pandemic maximum, meaning that it’s still far from recovery or growth.

Looking at the asset types more closely, we can see that several asset classes increased on an MoM basis, while several others decreased. Bond holdings were the ones that experienced the largest absolute increase, growing by HRK 238.6m or 2.6%, followed by investment funds, with HRK 57.6m or 3.9%, and shares, with HRK 44.1m or 2.2%. On the other hand, Deposits and cash was the asset class that declined the most, decreasing HRK 245.8m or 6.1%. The only other asset class to have a noteworthy decrease were the receivables, which declined by HRK 38.2m or 57.5%. Looking at this data would point towards the fact that less risky types of assets, like deposits and cash, are being transferred back into equity and debt holdings (bonds, inv. funds, shares), which would mean that the expectation by the fund managers is that its worth investing into these assets classes, at least currently. This is also supported by the fact that this is the first MoM increase in NAV since October 2021.

However, the net contributions into the funds should also be looked at, as then the whole picture can be considered, i.e. the MoM increase can also be due to the fact that higher contributions were made, and also, that the value of the invested assets (bonds, shares, investment funds, etc.) increased. In July, net contributions into the funds amounted to HRK 65.4m, while the month also recorded some small recovery in value, especially in the international markets, which means that the MoM NAV increase can be attributed both to higher net contributions, as well as an increase in value of investments.

On a YTD basis, however, the decline can be seen in all the asset classes. In fact, the NAV decreased by HRK 4.67bn, or 21.7% since the beginning of the year. This was led by the decrease in bond holdings, which decreased by 2.76bn or 22.5%, followed by deposits and cash, which decreased by HRK 1.06bn, or 22%, share holdings, which decreased by HRK 512.7m or 19.8%, and finally, the money market holdings, which decreased by HRK 203.2m, or 42%. This would mean that despite the MoM increase, the YTD trend is still not that positive.

Meanwhile, looking at the securities and deposits, both domestic and foreign securities and deposits increased in July, on an MoM basis. Domestic securities and deposits increased only slightly, by 0.13% or HRK 11.6m MoM, while on a YTD basis, it decreased by 19% or HRK 2.09bn. Foreign securities and deposits increased by HRK 287.9m, or 5.2% on an MoM basis, while still recording a decrease of HRK 1.7bn, or 23%, on a YTD basis. This would mean that despite the increase on an MoM basis, in total, both domestic and foreign securities and deposits decreased by 20%, or HRK 3.79bn, on a YTD basis.

Looking over to the asset structure of the Croatian mutual funds, bond holdings still make up the largest proportion of total assets, with 55.3% (or HRK 9.55bn), representing an increase of 1.2 p.p. MoM, but a decrease of 0.9 p.p. YTD. Following them, we have deposits and cash, at 21.9% of the total, which is a decrease of 1.5 p.p. MoM, and 0.2 p.p. YTD. Next up, we have shares, with 12% of the total, which is an increase of 0.2 p.p. for both the MoM and YTD numbers. Finally, we have investment funds, whose holdings amounted to 9% of the total, representing an increase of 0.3 p.p. MoM, and 1.6 p.p. YTD.

Croatian mutual funds AUM structure (July 2022, %)

If we were to look at investments into equity in these funds by themselves, 27.8% of the amount is invested into domestic equity. This represents a decrease of 15% YoY, or HRK -1.62bn. The remaining 72.2% is invested into foreign equity, representing a decrease of 27%, or HRK -1.03bn YoY.

Total assets of all Croatian UCITS funds (2015 – July 2022, EURm)

Here you can find the dates for the upcoming events of the regional companies.

Due to the nature of these events, they are subject to change (might be postponed or canceled).