Annual report 2005 - Sava dd

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envisaged for 2006 when the present investment cycle is to be completed. The major part or a good half
of investment assets is earmarked for the accelerated development of tourism amenities in both
destinations, Bled and Pannonian Spas. The investment cycle that began in Bled, where the renovation
of the entire range of services infrastructure is currently being completed, comprised the modernisation
and expansion of high-quality hotel, catering, wellness and golf facilities. Investments in the tourism
infrastructure in Pannonian Spas will round off the cycle.
The renovation of facilities represents the foundation, but not the only factor that is vital to increase
profitability in the tourism industry. As one of the central and, according to some criteria, even the
leading provider of tourist services in Slovenia we realise that a breakthrough in quality tourist services
is inevitable, since Slovenia as a tourist destination has many opportunities in this area. Only after
completing this task, which includes increasing the level of quality of knowledge, organisation,
marketing and advertising, will it be possible to accomplish an increase in profitability as planned.
Therefore future investments in tourism will be directed towards the aforementioned factors. We are
also counting on assistance and collaboration from the state and establishing links with tourism
organisations in Slovenia, particularly in the area of marketing, purchasing and real estate.
Forecast of changes in the Sava Group
Investments in Tourism place distinguished products and operations with higher added value in focus.
Yet, this process should not be discussed only in terms of operations and programmes, but also at the
highest level – the structure of the Sava Group. In 2004 we sold our main investment in Chemicals, in
the coatings industry, to which we adapted by excluding Chemicals as an independent division.
Although the year passed without any other great change in the Group’s internal structure, it was time
to make a decision and conclude agreements on how to encourage the development of Trade as a
strategic operation. However, as assumed in the strategy outlined for the first period of the
restructuring process in the Sava Group, Trade should have utilised significant favourable effects from
internal links with Chemicals. The result was an agreement with the trading enterprise Merkur
concluded in February 2006. The investment in Trade will be replaced by playing an active role in
managing this trading enterprise, in which we have acquired a one fifth stake. Consequently, the
decision to restructure the division and sell the entire business stake in the companies Sava Trade d.d.
and MG Market d.d. presents the logical continuation of selling our investment in Chemicals and the
coatings industry, respectively, on which this operation was founded.
The business in Real Estate is conducted in the direction outlined, the division becoming ever more
present in the Croatian real estate market.
Preparations for future changes
In addition to the agreed upon and envisaged restructuring of real investment in Trade and its exclusion
from the Sava Group we are not planning any other more significant changes in the Group’s
composition in 2006, being conditioned by favourable market opportunities. Yet we admit to responding
to opportunities that allow the expansion of Rubber Manufacturing. In this division future development
is based on investments or external growth through acquisitions in new markets, with a parallel
increase in the share of Rubber Manufacturing in consolidated sales.
The shift in the Group’s composition that is restructuring real investment in Trade into a financial
investment will have a considerable impact on business achievements and indicators of the Group in 2006.
For shareholders and the holding company Sava it is of paramount importance that capital invested in
trade operations through its transfers under financial investments will win on profitability and further
improve the structure and have a positive effect with investments in the Investment Finance division.
The restructuring will have the strongest influence on the volume of consolidated revenues of the Group,
which will be reduced by a good third.