Adris grupa d d : Interim financial statements 4Q2020(eng)

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 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. (hereinafter: the "Group").

2. SIGNIFICANT EVENTS

The COVID-19 pandemic that started in early 2020 lead to a global economic crisis. Supply chains were interrupted, cross-border travel was reduced or completely stopped, and the uncertainty caused economic optimism to decline as well. Capital investments were reduced or stopped as a result. The world faced the greatest economic crisis since World War II. In addition to the economic crisis, Croatia suffered two earthquakes in 2020. The first struck in March, with a magnitude of 5.5 on Richter's scale, mostly affecting the capital, Zagreb. The second, with a magnitude of 6.4 on Richter's scale, struck the Sisak-Moslavina County, its epicentre being near Petrinja, in late December.

In such circumstances, Adris grupa, according to its Q4 2020 unaudited consolidated reports, posted a total revenue of HRK 5 billion, down 17% year-on-year. Revenue from the sales of goods and services amounted to HRK 4.3 billion, down 20% year-on-year. Consolidated EBITDA (profit before interest, taxes and amortization) stood at HRK 586 million, and net profit at HRK 41 million. The Group protected the financial potential required for a new investment and development cycle.

The Group's tourism business in Istria showed resilience amidst the economic crisis. Rovinj luxury

hotels and camps boast the best results

The past year was the worst in history: tourist arrivals were down 74% globally. According to the World Tourism Organization (UNWTO), Europe experienced a 71% drop in tourist arrivals. The loss of tourism export revenue is estimated at USD 1300 billion and is more than 11 times higher than in the global economic crisis of 2009. According to the UNWTO's data, the pandemic threatened between 100 and 120 million jobs in tourism. With a 63% drop in tourist arrivals and 50% drop in overnights (approximate figures), Croatia boasts the best results in the Mediterranean. The decline in the commercial segment is 55%.

A number of business process optimization and cost rationalization measures were launched in the Group's tourism business in response to the crisis. We maintained the continuity of our product improvement efforts and invested HRK 220 million even in this challenging year, mostly in improving the quality of the extra amenities at the Koversada/Porto Sole and Amarin camps. The preparations for planned projects and investments for the period after 2020 continued. Maistra, including the Hilton Imperial in Dubrovnik, sold 679,000 unts in 2020, 45% of last year's result in the same period. Revenue from the sales of goods and services was at 41% of last year's result in the same period. A segment-by-segment analysis shows that the camps' results in terms of the number of units sold in 2020 were nine percentage points higher than Maistra's average. Between June and September, when our business was mostly unencumbered by restrictions introduced due to epidemiological measures, the luxury hotel segment in Rovinj had the best sales results compared to last year, with its results higher than Maistra's average by seven percentage points. Results are shown in form of the performance index in relation to last year. In 2020, HUP-Zagreb sold 18% of units sold in 2019 and posted 18% of the sales revenue from 2019. The consolidated sales revenue of the tourism segment in 2020 amounted to HRK 587 million, 35% of last year's result. EBITDA (profit before interest, taxes and amortization) amounted to HRK 93 million, and net profit to minus HRK 136 million. The Group's positive EBITDA indicates that the tourism segment maintained a level of operating profit and liquidity sufficient to support its regular operations in the crisis year of 2020.

In spite of strong external shocks, Croatia osiguranje strengthened its position in the Croatian market and posted a good financial result

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Croatia osiguranje strengthened its position as the market leader in 2020. After years of decline, it reversed the trend for the first time, and increased its market share. Croatia osiguranje is the convincing Croatian market leader, with a market share of 26.7%, or 0.5% more than in 2019.

A number of one-off items burdened the business of Croatia osiguranje in 2020, the largest being the costs of the earthquakes in March and December, and the decision of the Croatian Supreme Court to increase the orientation criteria and amounts for non-pecuniary losses. Income from dividend and recovery of claims also decreased amidst the COVID-19 crisis. The net effect of the above events and activities took more than HRK 100 million off the company's result before taxes. The Company largely compensated for this negative effect with operating excellence and the positive effects of the Company's transformation programmes, and the CO grupa posted a net profit amounting to HRK 328 million in 2020.

As the regional and digital leader, at the moment Croatia osiguranje invests more than HRK 200 million in digitalisation and new product development. A number of successful projects were launched, from remote damage reports, the new Moja Croatia app and the Company's new website, to the launch of a completely new product, Laqo osiguranje - the first Croatian 100% digital insurance. The Company also developed and launched the specialist post-graduate course 'Products, Digital Innovation and Technologies in Insurance (Insurtech)' in cooperation with the Faculty of Electrical Engineering and Computing in Zagreb. The trend of strengthening the internal network and expanding the external sales network continued, and a new call centre was opened in Vukovar.

With 9% volume growth, Cromaris reached annual sales of 10,000 tonnes of whole fish equivalent

The COVID-19 crisis caused a number of logistics challenges in fresh fish and fish product distribution at the end of Q1 2020 and in Q2 2020. The shutdown of catering establishments in its key markets drove the Company to shift its focus to retail chains, which required it to quickly adapt its sales portfolio, as well as of the organisation of its production and distribution.

In 2020, Cromaris sold 10,376 tonnes of whole fish equivalent, up 9% year-on-year. Export volumes were up 17%. Export markets account for 84% of Cromaris' sales volumes, and 86% of its sales revenue. Revenue from differentiated products, mainly fresh gutted and packaged fish - sea bream, sea bass and meagre fillets - was up 16%. At the moment, differentiated products account for 48% of the company's sales revenue, in line with Cromaris' strategy of standing out from the competition. Average prices increased 2%. Sales revenue in 2020 amounted to HRK 512 million and was up 8% year-on-year. Cromaris posted a net profit of HRK 9.2 million in 2020.

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 recognising business opportunities as well as realizing new acquisitions.

4. INFORMATION ON THE ACQUISITION AND RELEASE OF TREASURY SHARES

From 1 January till 31 December 2020 the Company acquired 11,867 own class ADRS (ADRS-R-A) shares, accounting for 0.1234% of the shares from this class and 0.0723% of the Company's total share capital. During the reporting period, the Company acquired 93,863 own class ADRS2 (ADRS-P-A) shares, accounting for 1.3835% of the shares from this class and 0.5723% of the Company's total share capital.

Detailed information on each individual acquisition transaction was publicly disclosed in accordance with the Companies Act, Capital Market Act and the Rules of the Zagreb Stock Exchange d. d.

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