Adris grupa d d : Interim financial statements 1Q2022(eng)

ADRIS GRUPA d. d.

Rovinj

ADRIS GRUPA d. d.

CONDENSED NON-AUDITED

CONSOLIDATED AND SEPARATE

FINANCIAL STATEMENTS

for the period ended 31 March 2022

This version of a document is translation from the original, which was prepared in Croatian language. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation, views or opinions, the original language version of our document takes precedence over this translation.

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ADRIS GRUPA d. d.

Rovinj

MANAGEMENT REPORT

for the period ended 31 March 2022

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1. PRINCIPAL ACTIVITY OF THE COMPANY

The principal activity of the company ADRIS GRUPA d. d. (hereinafter: "Adris" or the "Company") is management and investment. The aim of the Company as a corporate centre is to coordinate investment, management, development and operation of the system as a whole.

Adris (hereinafter: the "Group") comprises three strategic business units: tourism, managed by MAISTRA d. d., manufacture of healthy food managed by CROMARIS d. d., and insurance managed by CROATIA osiguranje d. d.

2. SIGNIFICANT EVENTS

The pandemic caused a disruption of supply chains and uncertainty regarding the speed of their resumption. Shortages of some goods fuelled price increases, ultimately affecting consumer power. We entered the year 2022 with the highest inflation rate in the last 14 years. December 2021 prices of goods and services for personal consumption rose 5.5% when compared to December 2020.

Russia launched an invasion of Ukraine at the end of February 2022. Adris Group and its constituent companies are not directly affected by the Russian invasion of Ukraine. Given that the war and the sanctions against Russia have created downsides for the global and European economies, they will certainly have negative impact on the Croatian economy and/or indirectly on our business operations. Energy crisis is already leading to a rise in electricity and gas prices, and subsequently in prices of food and transportation services. In March 2022 inflation accelerated to 7.3% in Croatia. In this situation, input costs are expected to rise. All companies within the Group are actively implementing business transformation programmes. One of the segments implies cost management together with energy efficiency projects.

Under such circumstances, in the first quarter of 2022, total revenue generated by Adris was HRK 1.19 billion, or 11% higher than in the first quarter of 2021. Revenue from sales of goods and services amounted to HRK 1.11 billion, which is up 16% from revenue recorded a year before. Consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) amount to HRK 173 million, which is up 4%. Net profit generated in the first quarter of 2022 amounts to HRK 12.2 million, which represents an increase of 14% when compared to the figures recorded for the same reporting period last year. Government grants due to COVID-19 pandemic amounted to HRK 31 million in the first quarter of 2021.

Investments and preparation of new projects in the conditions of tourism resumption continue

In the first quarter of 2022, the tourism division sold 104,000 units, which is two and a half times as many as in the same reporting period last year and/or 82% of the result from the record-breaking year of 2019. The Istrian business increased its sales by 8% relative to 2019, the sales of the Zagreb-based hotels reached 63% of the result from 2019, and the Dubrovnik-based hotels only 22%. Revenue from sales of goods and services in the tourism segment generated HRK 100 million or double as much as in the first three months of last year and/or 89% of the result recorded for 2019. Consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) are HRK -26 million, and EBIT are HRK -97 million. Operating profit remained at the last year's level, where the company received HRK 24 million of government grants due to COVID-19 pandemic.

At this point the booking is significantly better than last year and shows that there is strong interest among international travellers to arrive for their holidays during high and low seasons. The Group's tourism division has continued their transformation programme in four major areas: marketing and sales, operations, human resources and support functions. Special emphasis is placed on improvement of user experience, revenue management by the use of advanced analytics and further development of direct sales channels. This year the tourism division plans to invest HRK 430 million, primarily in reconstruction and repositioning of their Zagreb-based hotel Panorama. More than HRK 100 million will be invested in quality improvement in the Group's campsites, mainly in shared amenities. Preparations continue on two strategic tourism projects, the Westin Hotel in Zagreb and the Marjan Hotel in Split.

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Croatia osiguranje sees its Croatia market share and consolidated net profit increase

In the first quarter of 2022, the Croatian insurance market increased 8%, and Croatia osiguranje managed to strengthen its position as a market leader. The total gross written premium generated in Croatia amounted to HRK 957 million, which is up 14% in comparison with the same period last year. The company's market share is 29.1%, and the reported increase for the first quarter is 1.5 percentage points.

Consolidated gross written premium, including regional branches, amounts to HRK 1,139 million and is 16% over the last year's figure for the first quarter. Combined operating ratio of CO Group, as one of key indicators measuring profitability in insurance, is 88.5 which is at the level of the most profitable companies in insurance.

Consolidated net profit generated by Croatia osiguranje in the first quarter of 2022 amounts to HRK 134 million which is up 4%.

A new cycle of transformation initiatives "Sprint 2022" was launched in order to achieve further premium increase and more effective cost management. This programme includes both Croatian and regional branches.

The company continued the digitalization of its business and is set to invest more than HRK 100 million in this segment in 2022. CO's premium from its digital business in the first quarter of 2022 was up 42% relative to the first quarter of 2021, whereas a number of clients using the application Moja Croatia grew by 80%. CO's brand Laqo grew by 95% relative to the same period last year. Laqo Prevent, the programme promoting safe driving, is actively used by 33% of mobile app users, and was awarded as the best in the category of Technology and Innovation at the Days of Communication this year.

Croatia osiguranje is continuing its investments in private healthcare and is committed to the highest standards of medical excellence. The company is set to invest HRK 60 million in 2022 and 2023. In March, the company opened a new Croatia Poliklinika in Rijeka which uses state-of-the-art diagnostic and medical equipment and technology. This is the fifth private polyclinic opened by Croatia osiguranje in addition to the existing polyclinics in Zagreb, Split, Pula and Koprivnica.

Cromaris increased sales volume by 20%, exports rose 24%

In the first quarter of 2022 Cromaris' sales volume amounted to 3,160 tonnes of whole fish equivalent which is 20% higher than in the first three months of last year. Export volumes were up 24%, mainly due to strong growth on the Italian and Spanish markets. Export markets continue to account for a high portion of Cromaris' sales - 91% of sales volume, and 92% of sales revenues. New fish species in the company's mariculture programme, greater amberjack and common dentex, boast the highest growth in the portfolio of differentiated products, which accounted for 36% of the company's revenues in the first quarter of 2022. Revenues from sales amounted to HRK 157 million representing an increase of 25%. Earnings before interest, taxes, depreciation and amortization (EBITDA) amounted to HRK 24 million which is up 6%. The company received HRK 6.8 million of government grants due to COVID-19 pandemic. Net profit generated in the first quarter of 2022 amounted to HRK 7.7 million.

Implementation of transformation initiatives at Cromaris will continue, with an emphasis on profitability. This year the focus will be on implementation of business excellence models in two key areas - market business and operations.

3. RESEARCH AND DEVELOPMENT ACTIVITIES

The Company continually monitors events in its environment and invests in market research, in addition to directing and supporting activities of its subsidiaries with the purpose of achieving organic growth and recognizing business opportunities as well as realizing new acquisitions.

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